Vodacom's high data traffic will likely be permanent, say analysts

Vodacom CEO Shameel Joosub. (Pic: Gallo Images)
Vodacom CEO Shameel Joosub. (Pic: Gallo Images)

Vodacom says the current lockdown, which has led to its data traffic increasing by as much as 40%, has shown it that it can reduce its costs of producing data and be able attract more customers once additional spectrum is auctioned to mobile operators.

While the network operator's CEO, Shameel Joosub, said there will be no additional data price cuts this year, new spectrum, which Vodacom expects government to auction towards the end of 2020, can enable further price cuts.

Joosub said the lockdown has shown Vodacom that data has good price elasticity, meaning that if its prices fall, demand will rise even more. The temporary additional spectrum that the Independent Communications Authority of SA gave mobile operators in April has shown Vodacom that it will be better able to play the volumes game if it does not have to roll out additional 3G or 4G sites to cater for new data customers.

"It does show us what the capability is if we do access to more spectrum and how that can drive down savings," said Joosub, who also added that price elasticity of data has been "above our expectations" during the current lockdown.

However, Icasa only gave mobile operators additional spectrum on a temporary basis to help government disseminate communication about the coronavirus crisis. They must return it before the planned spectrum auction.

Abnormal traffic growth

Ruhan du Plessis, analyst at Avior Capital, said the lockdown had resulted in a structural shift that will make demand for digital services and data permanently higher. Because of the shift, he said Vodacom would maintain above-average traffic growth, but new spectrum will be needed to carry this traffic.

"Various factors will impact where demand goes. Telkom has ability to capture the lower end in mobile but also fixed demand from the home. Vodacom has the high value contract customers who have ability to maintain spend and lockdowns make ability to get another operators sims difficult," he added.

More levers of growth

Joosub said the group will keep diversifying its investments in ventures such as the Internet of Things and financial services.

The group, which already offers micro loans to small and medium enterprises in SA, will be looking to introduce nano loans in the country. Vodacom has distributed US$2.5 billion worth of these small value in various other African countries through its M-PESA joint venture. It said in SA, the loans will be extended through its "enhanced" VodaPay platform to be launched later this year.

"We see an opportunity that if we can advance airtime, we can advance things like electricity, water and other products and services," said Joosub.

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