Vodacom grabs market share in the tight SA market

Vodacom has managed to increase its South African prepaid customer base by 927 000 active customers during the six months ended September.

This is unveiled in the six months financial results released this morning and showing interim group revenue growth of 7.5% to R36.6bn.

The South African numbers go into cementing Vodacom’s position as the largest mobile phone network operator in the country with a subscriber base topping the 30 million mark. MTN is positioned second with about 25 million subscribers and Cell C third with about 15 million subscribers. The tough economic conditions leading into a consumer sector squeeze have not helped the situation. The telecoms market is staging a ‘dog-eat-dog’ picture. Growth from one operator, on the voice front, means loss for the other.

As such the Vodacom numbers also comes to underline a fight back by Vodacom in a market that has become extremely tight. The South African mobile phone market, the voice segment in particular, is close to maturity. This has caused a mini price war by operators to grab market share, especially against the resurgent Cell C.

The mini price war is clearly reflected in Vodacom’s figures and expressions. Vodacom Group CEO Shameel Aziz Joosub notes that “Our programme to simplify price plans and offer more value has been well received by customers, resulting in a net gain in active prepaid customers of 927 000 in the six months, up 1.2%.”

The pricing transformation programme has delivered price declines of 16.9% in effective price per minute to 59 cents.”

Joosub also notes that “We have increased prepaid customer ARPU by 1.4% to R74 as a result of increased take up of prepaid data bundles and 19.3% growth in minutes of use, offsetting declines in price.”

The data bundle angle can be seen as a saviour in the South African market. Data revenue continues to grow at rapid levels across the market as a result of increasing take up of smartphones. This underlines the rush into the internet by South Africans.

Joosub says “Driven by lower handset prices and reduced data costs, smartphone adoption is growing rapidly across all of our operations.”

In South Africa, average data usage per smartphone increased 79% and for the Group, data traffic is more than 80% higher than a year ago. To cater for continued growth, we plan to accelerate network investment and we are currently in the process of determining the investment allocation per country.”

While Vodacom did relatively well on the prepaid front in South Africa, the contracted customer base remained flat during the six months ended September.

The group notes that “Contract mobile customer revenue was flat year on year at R10 639 million. Contract customers grew 2.2% to 4.8 million. Contract customer ARPU decreased 3.2% to R393 per month due to a higher prevalence of data only customers with lower ARPU and the decline in out-of-bundle spend.”

The decline in ARPU was largely offset by increased data spend as we move customers to better value integrated price plans and data enabled devices.”

At Group level Vodacom reports that active customers increased 9.7% to 53.8 million; with net connections of 949 000 for South Africa and 2.3 million in our International operations for the six months period.”

In its outlook, Vodacom is talking about reversing market share losses suffered in South Africa in the past. “South Africa has delivered a solid performance, seeing a reversal of negative growth trends in prior quarters. This has been mainly from good execution of our pricing transformation program and strong data growth.”

Our International operations are still showing strong growth despite regulatory headwinds and intensified competition. The results of the past six months show that we are on track to deliver on our medium term guidance of low single digit service revenue growth, mid to high single digit EBITDA growth and capital intensity of 11 – 13%, communicated during May 2013.”


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