South Africa-based Vodacom partly attributed a year-on-year fall in group Q3 revenue (the three months ended December 2014) to a halving of mobile termination rates (MTRs) in its home market, which came into effect in April 2014, but pointed the finger too at increased competition and more budget conscious consumers.
“There was a significant impact from the 50 percent decline in mobile termination rates in South Africa, increased competition and we’re seeing increased pressure on consumer spending,” said CEO Shameel Joosub (pictured).
Group revenue dipped by 1.1 per cent, to ZAR19.99 billion ($1.75 billion), while service revenue was down 2.7 per cent, to ZAR15.82 billion.
Sales in South Africa fell 3.1 per cent, to ZAR15.99 billion.
Strip out those domestic MTR cuts, however, and Vodacom said group revenue would have risen 1.5 per cent, and that sales in its domestic market would have remained flat.
But MTRs were not solely to blame for a top-line decline, as the CEO pointed out.
Service revenue in South Africa fell 5.8 per cent, to ZAR11.86 billion, and would still have fallen – by 1.7 per cent – if MTR cuts were removed from the equation. Increased competition, and consumers keeping a more watchful eye on how much they are spending, is also taking its toll.
One Q3 upside for Vodacom was strong data growth. Group data revenue increased 19.9 per cent, to ZAR4.33 billion, representing 27.4 per cent of service revenue.
Group active customers increased 9.1 per cent, to 61.1 million, but active data customers grew 16.4 per cent, to 26.5 million
“Data was once again a key highlight, with active data customers up 16.4 per cent, to 26.5 million, and data traffic growing 62.2 per cent in South Africa and an almost threefold increase in the international operations,” enthused Joosub.
Vodacom said that its domestic LTE network now covers 34 per cent of the population (2,194 sites), while 3G population coverage is 94 per cent (8,407 sites).
Internationally, the operator said it had increased the number of 3G sites by 52.7 per cent in comparison to last year, and that the number of 2G sites was up 27.2 per cent.
International service revenue grew 7.6 per cent year-on-year, to ZAR3.98 billion, although quarter-on-quarter growth was slower (2.6 per cent).
Vodacom said the slowdown reflected “on-going price competition and regulatory pressures in our key markets”. Tanzania experienced “severe pricing pressures since Q3 last year”, although the operator added that during the course of this year “pricing repair has led to more stable pricing”.
Growth in the DRC “reduced due to slower than anticipated network rollout and competitive pressures”, but Mozambique and Lesotho “continue to grow strongly”.
Revenue from M-Pesa, the money transfer service, grew 28.2 per cent in Q3 2014-15, while the number of M-Pesa customers increased 29.7 per cent, to 7.6 million.
Joosub added that the operator is “continuing to work through the approvals process” for the acquisition of fixed-line provider Neotel in its domestic market.
“South Africa’s fixed broadband penetration level is one tenth of that seen in developed economies, which impacts our competitiveness as a nation,” he said. “If the transaction goes through, our ambition is to add at least one million fibre connections to homes and businesses to address this shortfall. By boosting investment in Neotel, we’re convinced we can play a major part in helping government reach its 2020 and 2030 broadband targets.”