Vodacom revenue analysis by Frost & Sullivan

Telecom Lead Africa: Over the past year, the Vodacom
Group has emphasized the need to improve infrastructure as it lays the
foundation to improve service quality. In its first full year under the new
brand, the group’s international operations delivered a solid performance while
the company stated its intent to finally dispose of its Gateway carrier

Today, Vodacom released its financial results for the
year to 31st March 2012. The group’s total service revenue increased 7.8
percent to R 58.2 billion. This was driven largely by data services and
international operations, which contributed to 87 percent of the revenue
growth. Data revenue grew by 23.6 percent to R 7.6 billion while revenue from
internal operations increased by 22.4 percent. Group EBITDA rose by 10.5
percent to R 22.8 billion for the period and headline earnings were 709 cents,
increasing by 8.1 percent.

The market for data subscribers is heavily contested by
the operators, based mainly on competitive pricing. The market could witness an
intense price war as the local operators jostle for market share,” said Frost
& Sullivan ICT analyst Lehlohonolo Mokenela. 

Over the reporting period alone, competitive pressures
saw Vodacom cut its data prices by over 18 percent. Mokenela believes that this
could put a squeeze on Vodacom’s margins in the next period, but expects higher
usage to drive revenue growth.

Vodacom’s international operations in Tanzania, DRC,
Mozambique and Lesotho continued to post impressive numbers. They contributed
17.4 percent to the group’s service revenues compared to 14.7 percent the year
before. The 27.5 percent increase in revenue came on the back of a higher
subscriber base, which rose by 35 percent to 18.9 million subscribers.

The group’s financial services product, M-PESA, enjoyed
more success over the period in Tanzania, which added 1.8 million active
subscribers. The service contributed 8.5 percent to Tanzania’s service revenue
compared to 2.8 percent the year before.

The disposal of Gateway is under way following a few
periods of disappointing performances from the carrier business. However, the
resolution of the company’s shareholding in the DRC operations remains a cause
for concern. The company seems reluctant to release the assets despite the June
3rd deadline set in the court order.  

The South African operations generated R 48.2 billion in
revenue, a growth of 4.4 percent for the year despite a 27 percent growth in
subscriber numbers. This was attributed to the 14.2 percent drop in ARPU as a
result of the rising number of low end usage subscribers and lower termination
mobile termination.

With mobile services in South Africa ranking amongst the
least affordable in Africa, there is still scope for more price reductions. We
can expect to see further price cuts in the coming year and subsequently lower
ARPUs unless this is matched by a sizeable increase in traffic,” Mokenela

Vodacom continued its aggressive investment program
geared towards improving its network. CAPEX was up 37.3 percent for the period
to R8.7 billion as the operator installed 973 new 3G base stations in South
Africa to bring the total to 5,263 3G base stations.

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