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Telecommunications group Vodacom Group [JSE:VOD] delivered a promising set of results last week, with increases in revenue and subscriber numbers (see Vic de Klerk’s report, page 58). While the network remains dominant in its home country South Africa, its growth beyond its borders has been limited. As a subsidiary of British telecoms giant Vodafone we’re told Vodacom’s spread into Africa is vital. Or is it enough to be number one in SA?
Vodacom CEO Pieter Uys admits its performance in the rest of the continent has been less than ideal. Vodacom acquired the Gateway company to give it leverage into Africa. Gateway has drastically lost value since then and, in its latest set of results for the year to end-March 2011, Vodacom had to impair it again, leading to a R1,5bn loss. Part of its strategy in Africa lies in its business services division. While performance over the past year wasn’t great, Uys says contracts have been put in place that will bolster Vodacom Business over the next period.
Business services aside, Uys says the carrier side of Vodacom’s African operations is now delivering. “We still believe Internet penetration into Africa is important,” he says. “We’re refocusing, reorganising and driving better integration with the rest of the group.”
The Democratic Republic of Congo has been Vodacom’s toughest market, where it faced disputes with its local partner in Vodacom Congo, Congolese Wireless Networks (CWN). That saga is ongoing. Uys says competition has also been aggressive in the DRC and network quality for all players has consequently deteriorated. Uys has said before that Vodacom would pull out of the DRC if things didn’t go its way. However, the DRC government has stepped in and set minimum tariffs to protect the industry.
Smaller markets such as Mozambique, Tanzania and Lesotho are now better than they were a year ago, says Uys. “There are opportunities in the rest of Africa but we won’t overpay for them. So it’s a long process. There’s also the possibility of consolidation at some point… There’s nothing on our doorstep at the moment though.”
Promisingly, Vodacom added 3,3m subscribers to its operations outside Africa and also showed increased data revenues, supporting Uys’s assertion that data will be key to its success outside SA – just as it’s proving to be in its home country.
ICT industry analyst at Frost & Sullivan, Protea Hirschel, highlights Vodacom’s growth in data services. Revenue for Vodacom from data grew by 35,5% to R6,4bn last year. Says Hirschel: “[Vodacom’s] hand set strategies – particularly smartphones – tap into the importance of those devices as a driver for data services. Vodacom is also diversifying into other products, ranging from mobile money to music downloads. We expect Vodacom to be following the lead of its parent company in developing other markets in future, such as mobile health and machine to machine communications.”
She also points to Vodacom’s capex spend of R5,1bn for its South African network, geared at improving data services by upgrading base stations and expanding its self-provisioned transmission network. Hirschel predicts that will bolster cost efficiency for Vodacom and the extra capacity will place it in a favourable position for the future. “Streamlining the group’s organisational structure in conjunction with the rebranding should result in greater agility when faced with maturing and competitive markets,” she says.
It’s good times at Vodacom and earnings are looking good for investors. However, major growth lies outside SA and the next year will be vital for Vodacom in that regard.
Vodacom CEO Pieter Uys admits its performance in the rest of the continent has been less than ideal. Vodacom acquired the Gateway company to give it leverage into Africa. Gateway has drastically lost value since then and, in its latest set of results for the year to end-March 2011, Vodacom had to impair it again, leading to a R1,5bn loss. Part of its strategy in Africa lies in its business services division. While performance over the past year wasn’t great, Uys says contracts have been put in place that will bolster Vodacom Business over the next period.
Business services aside, Uys says the carrier side of Vodacom’s African operations is now delivering. “We still believe Internet penetration into Africa is important,” he says. “We’re refocusing, reorganising and driving better integration with the rest of the group.”
The Democratic Republic of Congo has been Vodacom’s toughest market, where it faced disputes with its local partner in Vodacom Congo, Congolese Wireless Networks (CWN). That saga is ongoing. Uys says competition has also been aggressive in the DRC and network quality for all players has consequently deteriorated. Uys has said before that Vodacom would pull out of the DRC if things didn’t go its way. However, the DRC government has stepped in and set minimum tariffs to protect the industry.
Smaller markets such as Mozambique, Tanzania and Lesotho are now better than they were a year ago, says Uys. “There are opportunities in the rest of Africa but we won’t overpay for them. So it’s a long process. There’s also the possibility of consolidation at some point… There’s nothing on our doorstep at the moment though.”
Promisingly, Vodacom added 3,3m subscribers to its operations outside Africa and also showed increased data revenues, supporting Uys’s assertion that data will be key to its success outside SA – just as it’s proving to be in its home country.
ICT industry analyst at Frost & Sullivan, Protea Hirschel, highlights Vodacom’s growth in data services. Revenue for Vodacom from data grew by 35,5% to R6,4bn last year. Says Hirschel: “[Vodacom’s] hand set strategies – particularly smartphones – tap into the importance of those devices as a driver for data services. Vodacom is also diversifying into other products, ranging from mobile money to music downloads. We expect Vodacom to be following the lead of its parent company in developing other markets in future, such as mobile health and machine to machine communications.”
She also points to Vodacom’s capex spend of R5,1bn for its South African network, geared at improving data services by upgrading base stations and expanding its self-provisioned transmission network. Hirschel predicts that will bolster cost efficiency for Vodacom and the extra capacity will place it in a favourable position for the future. “Streamlining the group’s organisational structure in conjunction with the rebranding should result in greater agility when faced with maturing and competitive markets,” she says.
It’s good times at Vodacom and earnings are looking good for investors. However, major growth lies outside SA and the next year will be vital for Vodacom in that regard.
