Vodacom Group Limited trading update for the quarter ended 31 December 2016

Salient features

• Group service revenue up 1.3% to R17 443 million with revenue up 1.2% to R21 222 million, normalised growth, excluding currency translation effects, was 4.4%* and 3.9%* respectively
• We added 1.6 million Group active customers during the quarter, 690 000 in South Africa and 876 000 in our International operations, to now reach 65.2 million active customers across the Group
• Group data revenue increased 18.4% to R6 533 million, representing 37.5% of service revenue
 
• South Africa service revenue grew 5.5% to R13 410 million, driven by strong data revenue growth of 22.0%
• International service revenue declined 8.2% (+3.4%*) to R4 206 million; impacted by customer registration processes and currency volatility

Shameel Joosub, Vodacom Group CEO commented:

I am pleased with what we achieved in the quarter. Performance was driven by strong customer growth in South Africa and strong data demand. In our International operations the effect of customer disconnections in Q4 of the prior year are still impacting its performance. Group service revenue growth of 1.3% was impacted by the strengthening of the rand to reporting currencies in our International operations, excluding which, normalised growth was 4.4%*.

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. This includes the continued impact of our segmented pricing offers, a key highlight of this quarter. Combined with our network advantage and delivering value for money propositions, this contributed to almost 700 000 new customers joining our network in South Africa this quarter, showcasing the success of our focus on bundle adoption through ‘Just 4 You,’ our youth proposition under the NXTLVL banner and our summer campaign. Strong growth in data demand outstripped declining voice revenues with service revenue growth of 5.5% to R13.4 billion in South Africa.

In our International operations, we added 876 000 customers in the quarter mirroring the positive trend that we reported in front at our Interim Results, as we continue to claw back many of the customers disconnected during Q4 of the prior year. Challenging conditions in the DRC were offset by a better performance in Tanzania and sustained growth in Mozambique resulting in a 3.4%* increase in normalised International service revenue.

The strong demand for data continues with traffic growth of 44.8% in South Africa and 61.7% across our International operations. 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 R2.7 billion in our infrastructure including R2.1 billion 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 R40.6 billion over a three-year period with R27.4 billion in South Africa alone.

As part of our effort to continuously reduce the cost to communicate in South Africa through our bundle pricing strategy, voice and data prices fell by 17.6% and 15.4% respectively as significantly 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%. Another significant win in helping bridge the digital divide was the introduction of a 4G device below the key R1 000 price-point to add to the success of the Smart Kicka 2, a low-priced yet high quality 3G smartphone.

The unavailability of spectrum, further delayed by the publication of the White Paper by the Ministry of Telecommunications and Postal Services in October last year, 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. This is the express objective of the White Paper and Vodacom is aligned with this goal.

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