Smartphone boom brings data joy to Vodacom earnings

Vodacom. (Duncan Alfreds, Fin24)
Vodacom. (Duncan Alfreds, Fin24)

Cape Town – Strong data revenue growth and an increase in new smartphone contracts in the fourth quarter of 2016 helped Vodacom grow its revenue, it said on Wednesday.

It said group data revenue increased by 18.4% to R6.533bn and makes up 37.5% of its service revenue. “South Africa service revenue grew 5.5% to R13.410bn, driven by strong data revenue growth of 22%,” Vodacom [JSE:VOD] said in its quarterly financial update on Wednesday.

Data revenue, as well as 1.6 million new customers (to reach 65.2 million customers), helped boost revenue up 1.2% to R21.222bn.

“Performance was driven by strong customer growth in South Africa and strong data demand,” said Vodacom CEO Shameel Joosub.

“Strong growth in South Africa was delivered through our strategy of sustained investment in network infrastructure, growing data demand and successful execution of our pricing strategy,” said Joosub.

“The strong demand for data continues with traffic growth of 44.8% in South Africa and 61.7% across our international operations,” said Joosub. “Data now comprises 40.8% (from 35.3% a year ago) of service revenue in South Africa and 25.2% (from 22.5% a year ago) in the international operations.

“To support this continued growth and to strengthen our network and service differentiation, we invested R2.7bn in our infrastructure including R2.1bn in South Africa where we expanded 4G coverage to 70% of the population and 3G to 99%.

“Including the current period, capital expenditure across the group will total at R40.6bn over a three-year period with R27.4bn in South Africa alone.”

Joosub said voice and data prices fell by 17.6% and 15.4% respectively as more prepaid and contract customers benefitted from using bundles.

“Over the past four years we have reduced the price of data by more than 60%.”

Improving customer experience with data

Joosub said improvements made to its out-of-data-bundle notification system resulted in an improved customer experience by giving customers more control.

“This together with the success of our pricing strategy of making data more affordable to all customers has resulted in a 49% increase in bundle sales and an overall effective price per MB reduction of 15.4%."

Consumers often complain over hefty data bills, with Fin24 reporting about a customer who ran up a bill of R12 000 in one month after he lost track of his data usage. The story resulted in Vodacom giving him a 80% discount on his bill.

"I am happy to inform you that Vodacom has ... given me an 80% discount on my data bill. Within two weeks they had paid R20 000 into my bank account," he wrote in December 2016.

Smartphone sales increase

Vodacom said smartphone sales volumes accelerated in the fourth quarter, up 29%, comprising 62.3% of device sales.

“Active smart devices on the network increased 23.1% to 16.6 million with the average monthly data usage on these devices at 667MB contributing to the 44.8% improvement in data traffic.”

One area of concern in South Africa was the unavailability of spectrum, said Vodacom.

The delay in spectrum was delayed by the publication of the White Paper by the Ministry of Telecommunications and Postal Services in October last year, which Vodacom said “remains a concern”.

“We have been involved in a number of positive engagements with relevant industry stakeholders as we seek to find a workable solution to make broadband even more accessible and affordable for South Africans,” Vodacom said.

The latest results comes as Vodacom is considering the sale of a R15bn stake in what would be one of the country’s biggest ever deals aimed at boosting black participation in the economy, Bloomberg reported on 25 January.

“Vodacom Group plans to buy back part of the 12.47% stake owned by government pension fund manager the Public Investment Corporation, said the people, who asked not to be identified as the deliberations are private,” Bloomberg reported.

Vodacom's share price was trading 0.67% stronger at the close of business on Tuesday at R151.

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