Vodacom shares suffer sharp decline despite rise in revenue

DURBAN – Vodacom’s share price declined by more than 7 percent at one stage on the JSE yesterday, after it reported a surprise slowdown in its South African service revenue growth due to weak consumer spend as competition for market share heats up.

In a trading update for the third quarter to end December, the mobile operator, which competes with Cell C, MTN and Telkom, said South African revenue decreased by 0.9 percent to R13.9 billion. However, Vodacom’s group revenue was up by 1.5 percent to R23bn, while international revenue increased by 13.2 percent to R5.2bn. 

Vodacom chief executive Shameel Joosub said a strong performance in its international operations helped to offset the slowdown in South Africa during the quarter, with improved trends in Tanzania and strong growth in Mozambique and the DRC. 

“Growth in revenue and service revenue at a group level increased by 1.5 percent and 2.4 percent, respectively. Excluding Safaricom, we added 198 000 customers in the three-month period and now serve 79 million across the group, having added a healthy 5.2 million customers to the Vodacom network in the past year,” Joosub said. 

In South Africa Vodacom said its customer numbers were up 5.4 percent. It gained 86 000 contract customers to 5.6 million, up 5.7 percent year-on-year.

However, contract customer service revenue was down 2.7 percent, as customers reduced out-of-bundle data spend and moved to more inclusive value contracts and lower value packages to control their spend in a constrained economy.

Local data revenue was flat on the prior year, but data traffic was up 41.4 percent. “Active smart devices on the network were up 13.3 percent to 20.2 million, with average gigabytes (GB) per smart device increasing by 31.9 percent to 1.1GB. 4G customers increased 40.5 percent to 9.2 million. We sold 209 million data bundles this quarter, as we continue to migrate customers to more in-bundle usage.

To tempt local customers to spend more on data, Vodacom said its platform strategy was gaining momentum with its Videoplay platform attracting more than 700 000 active users and its recently launched music platform, Muze, was gaining customers.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the third quarter revenue growth came out much lower than market expectations and the company’s own mid-term guidance. 

“Mobile data pricing pressure in South Africa is the key challenge due to regulation, weaker consumer spending and competition. Telkom mobile is the most aggressive on data pricing and MTN is now executing better than they did a few years ago. However, the weaker Vodacom South Africa revenue growth is a negative read for MTN South Africa as it suggests that the mobile market is weaker in general,” Takaendesa said. 

Takaendesa said Vodacom’s revenue growth rate was much lower than the CPI inflation rate and  likely to put pressure on the group’s profit margins for at least the mid-term.

Joosub said looking ahead, Vodacom would be implementing the End-User Subscriber Service Charter Regulations in South Africa on March 1, which would drag on data revenue growth in the near-term. The new regulations clamp down on out-of-bundle charges and data bundle expiry rules.

In the international operations, data revenue grew by 25.4 percent, M-Pesa was up by 30.3 percent. 

Vodacom’s share price closed 5.97 percent lower at R121.87 on the JSE on Thursday.


106409940 - Vodacom shares suffer sharp decline despite rise in revenue
vodacom - Vodacom shares suffer sharp decline despite rise in revenue
107822847 - Vodacom shares suffer sharp decline despite rise in revenue
4024951203 - Vodacom shares suffer sharp decline despite rise in revenue

Leave a Reply