Vodacom reports revenue growth amid data price war

Johannesburg- Vodacom [JSE:VOD] has reported revenue growth at its South Africa operations, despite the current data wars which have seen it adjust prices in challenging economic conditions.

Revenue grew for the year 31 March 2018 by 8.1% to R70bn, driven by smart device sales which account for 70% of total devices sold.

“South Africa delivered robust performance, despite ongoing data pricing transformation and a low economic growth environment,” the company said.

Headline earnings per share remained flat at R9.23.

Faced with a strong domestic competition and pressure to cut high data cost, Vodacom says it has reduced out-of-bundle data prices and introduced more value offers on its contract plans.

“Data revenue grew strongly at 12.8% to R23.4bn, contributing 42.8% of service revenue. This represents strong growth as we transform pricing for customers by reducing out-of-bundle spend,” the company said.

The company said the growth was achieved by improving customer data usage notifications, reducing of out-of-bundle rates by as much as 50% in October last year.

Vodacom Group revenue grew at 6.3% to R86.4bn, while net profit increased 18.6%, boosted by the Safaricom acquisition and by the profit from the sale of Helios Towers Tanzania Limited. 

Safaricom contributed R1.5bn profit for the eight months since acquisition, after deducting the amortisation of fair valued assets and before minority interest.

Vodacom declared a R4.25 final dividend, down from R4.35 in 2017.

Data wars

In April, the Independent Communications Authority of South Africa (Icasa), unveiled a set of regulations which would force mobile companies to allow customers to rollover unused data to the next month.

Unused data currently expire after a 30-day period. The new rules will also allow transfer of data and prohibit service providers to charge out of bundle charges without the customer consent.

Vodacom took note of the regulations which they say will take effect from 8 June 2018.

It said it had over the past three years reduced effective voice and data prices by 36.3% and 42.5% respectively, while maintaining revenue growth.

“In the second half 12% of data revenue was out-of-bundle revenue, down from 22% in the first half last year.”

Vodacom said it will “continue to manage the process for pricing transformation in data”.

“The priority is to manage out-of-bundle exposure in accordance with Icasa's recently published End-user and Subscriber Service Charter regulation, effectively improving the cost to communicate for customers,” said a statement.

Several mobile phone companies have responded to the regulations by slashing data prices, in a bid to attract and retain customers.

Abuse of dominance 

Vodacom's  five-year tender to provide contracts to 20 government departments from September last year until 2020 is currently under scrutiny from the competition commission.

“The Competition Commission has initiated an investigation against Vodacom Group for alleged abuse of dominance in terms of section 8 of the Competition Act.”

On 14 March 2016, National Treasury issued a tender for the supply of mobile phones to national and provincial government departments.

Vodacom says its confident that it followed “due process in a fiercely contested and transparent bidding process.” 

The commission says the contract would entrench Vodacom’s dominant position in the market, raise barriers to entry and expansion, distort competition in the market, and result in a loss of market share for other network operators.