Lower cell fees sting Vodacom

Johannesburg - The enforced reduction of mobile termination rates since March 2010 has chopped almost R400m from the quarterly income of telecommunications firm Vodacom Group [JSE:VOD].

On Thursday, the group reported a 4% increase (to R14.4bn) in service revenues from its South African operations for the three months to end-June, but said that it would've been up by 8.2% were it not for the interconnection reduction which had a R393m effect on its bottom line.

Interconnection rates are paid when network traffic switches from one network over to another. Vodacom has more subscribers than any other South African operator and has traditionally benefited from the rates paid to it by other networks for connecting calls.

The South African customer base also declined by 3.1 million to 23.2 million in the quarter mainly due to the changes in the disconnection policy of 13 months to seven months for call-forward Sim cards, Vodacom said.

Excluding the impact of the disconnection policy, prepaid customers declined by 11.9% year-on-year due to the Regulation of Interception of Communications and Provision of Communication-Related Information Amendment Act (Rica), it said.

Better fortunes elsewhere

Overall, the firm reported a 1.1 million increase in group customers for the period under review, resulting in total group customers of 37.7 million.

Service revenue was up 4.4% and the group also noted a 15.7% rise in its contract customer base.

Group revenue and service revenue increased in constant currency by 3% and 3.1% respectively - boosted by a 43.2% revenue growth for data services to R1.35bn.

The South African mobile operations contributed 61.4% of group total mobile customers, and data traffic increased 54.5%.

The South African rand strengthened against all the other functional currencies in the international operations, resulting in lower reported group revenue growth of 0.7% and service revenue growth of 0.6%. The South African mobile operations contributed 87.2% (March 2010: 87.4%) of group revenue.
 
The international operations recorded customer growth of 15.8% year-on-year to 14.6 million, adding almost one million customers in the quarter mainly from Tanzania where the market has responded well to the newly introduced tariff plans, Vodacom said.

Revenue in the international mobile operations in constant currency declined by 0.4%, and including the effect of foreign exchange movements, revenue declined 14.5% to R1.922bn. 

CEO Pieter Uys said: "This was a positive start to our financial year with overall group service revenue increasing 3.1% in constant currency. Our continued focus on broadband leadership paid off with group data revenue growing 43.2%.

"Excluding the impact of mobile termination rates (MTRs), South Africa's service revenue growth of 8.2% reflected robust growth in data revenue and gains on the voice side. Lower MTRs had a negative impact of approximately R393m on revenue in the quarter. We pressed ahead with actions to deliver greater value to customers launching prepaid promotions and reducing data and voice contract tariffs."

 - Fin24.com