Vodacom SA sees data traffic leap 66% in one year

The volume of data traffic flowing across Vodacom’s network in South Africa surged by 66% in the year ended 31 March 2020, after price reductions led to greater “elasticity” in demand from consumers.

The trend accelerated in the fourth quarter (January to March 2020), the company said, and may even accelerate as a result of work-from-home measures amid the Covid-19 pandemic.

Read: Vodacom reports 8.9% jump in full-year earnings

“We ended the year with data customers up 9.7% to 21.9 million and smartphone users up 11.8%, of which 73.3% are 4G customers,” Vodacom said. “The number of 4G devices on our network increased 34.5% to 12.9 million, while the average usage per smart device increased 56% to 1.5GB.”

We will be postponing the issuance of medium-term targets, until such time that we have more clarity on the economic outlook…

It said it’s confident the elasticity will continue following the price reductions agreed to with the Competition Commission after the financial year-end.

South African service revenue grew by 2.3% despite a tough economic environment, out-of-bundle rate cuts and the implementation of new regulations that affected out-of-bundle usage and revenue.

“Excluding the one-off benefit of R389-million from the change in revenue deferral methodology in the prior year and the current-year change in mobile termination rates (MTRs), underlying growth for the year was 3.3%. The fourth quarter revenue grew by 3.9% (5.1% adjusting for MTRs and prior year deferral) maintaining the commercial momentum from the previous quarter.”

Prepaid declines

However, prepaid customers declined by 5.6%, mainly as the result of continued optimisation of gross additions to improve the quality of the base.

“This has resulted in the one-month active customers being stable, evidencing this improvement. Usage elasticity on data has helped offset the out-of-bundle revenue reduction, resulting in average revenue per user (Arpu) returning to growth in the fourth quarter.”

In the contract segment, customer revenue declined 0.1%. Excluding the impact of the prior year’s revenue deferral, contract customer revenue increased 1.9%. Contract subscribers grew by 4.2% to 6.1 million.

Other highlights of the South African full-year results included:

• Fixed-line revenue increasing by 8.5%, supported by strong growth in cloud and hosting and connectivity revenue. Vodacom more than doubled the number of homes and businesses connected with fibre to 61 427, with its own fibre now passing 104 000 homes and businesses.
• IoT connections increasing by 17.2% to 5.3 million, with revenue growth of 38.5%.
• A 1.8 percentage point margin improvement in the second half of the year as service revenue returned to solid growth.
• Capital expenditure of R9.9-billion, with significant money directed to buying batteries and backup power to remain resilient during periods of prolonged load shedding.

Addressing the impact of Covid-19, Vodacom said the strength of its balance sheet will help cushion the impact of the expected economic downturn over the short to medium term. Ninety percent of its debt is rand denominated, limiting the foreign currency exposure.

“We maintained a market neutral debt structure between floating and fixed debt, which allows us to participate, with half our debt floating, in lowered interest rates while the other half of fixed debt protects against significant adverse interest movements,” it said.

We are monitoring events as they unfold during this period and we are preparing for various different scenarios

“We believe that continuing to invest into our network, IT and new platforms such as financial services is important throughout this period and we will maintain our flexibility in relation to the amount of capital expenditure and its allocation to different priorities considering the Covid-19 effects on the local economies in our markets.

“As the effects of the Covid-19 pandemic continue to unfold, the outlook for the economies in which we operate is uncertain. We will be postponing the issuance of medium-term targets, until such time that we have more clarity on the economic outlook and the effect on our business and operations over the medium term. While the situation remains challenging, we believe that the strength of our balance sheet and our resilient business model will allow us to continue to minimise these impacts and continue to create value for stakeholders. We are monitoring events as they unfold during this period and we are preparing for various different scenarios.”

This article was published with the permission of TechCentral, the original publication can be viewed here.

© 2020 NewsCentral Media