Mobile termination rates slash Vodacom earnings

2015-02-04 17:35

Mobile operator Vodacom’s group revenue for the last quarter of 2014 decreased thanks to the decrease in mobile termination rates implemented by the Independent Communications Authority of South Africa (Icasa) last year.

Icasa cut mobile termination rates (MTR) – the charges one network pays another to end a call on its network – by half to 20c, a move that was fought unsuccessfully by MTN and Vodacom.

Further annoying MTN and Vodacom was the asymmetry in the MTR rule where the bigger networks would pay the smaller ones, Cell C and Telkom, more for using their networks as a way to increase competition.

“We added 5.1 million customers in comparison to last year, taking our total customer base to 61.1 million,” said Vodacom CEO Shameel Joosub.

“Despite this increase in customers, it’s still been a challenging quarter with group revenue down 1.1%. There was a significant impact from the 50% decline in mobile termination rates in South Africa, increased competition and we’re seeing increased pressure on consumer spending. Revenue in South Africa declined 3.1%; excluding the impact from MTRs revenue, it would have remained flat.”

Vodacom’s real winner was data and the number of active data customers grew 16.4% to 26.5 million subscribers.

“Despite difficult trading conditions, we are continuing to invest in our networks and business because we believe it supports our network quality and growth aspirations which will deliver positive returns for our shareholders,” said Joosub.

Vodacom is also involved in a controversial transaction where it is seeking to acquire fixed-line operator Neotel for R7 billion.

All the other operators are objecting to the spectrum that Vodacom may acquire through the transaction and will allow it to grow its fast Long Term Evolution (LTE) network.

“We’re continuing to work through the approvals process for the acquisition of Neotel,” said Joosub.

“South Africa’s fixed broadband penetration level is 1/10th of that seen in developed economies, which impacts our competitiveness as a nation. If the transaction goes through, our ambition is to add at least 1 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,” explained Joosub.

By December 2014, Vodacom had about 31 million subscribers in South Africa.

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