Vodacom’s fiscal Q3 results lower on termination rate reduction and increased competition

Vodacom Group reported that revenue for the fiscal third-quarter to end-December 2014 dipped by 1.1 per cent, to ZAR19.99 billion (US$1.75 billion), while service revenue was down 2.7 per cent, to ZAR15.82 billion.

Sales in South Africa fell 3.1 per cent, to ZAR15.99 billion.

Vodacom partly attributed the year-on-year fall in group Q3 revenue to a halving of mobile termination rates (MTRs) in its home market, which came into effect in April 2014, but pointed the finger too at increased competition and more budget conscious consumers.

Strip out those domestic MTR cuts and Vodacom said group revenue would have risen 1.5 per cent, and that sales in its domestic market would have remained flat.

But MTRs were not solely to blame for a top-line decline.

Service revenue in South Africa fell 5.8 per cent, to ZAR11.86 billion, and would still have fallen – by 1.7 per cent – if MTR cuts were removed from the equation. Increased competition, and consumers keeping a more watchful eye on how much they are spending, is also taking its toll.

One Q3 upside for Vodacom was strong data growth. Group data revenue increased 19.9 per cent, to ZAR4.33 billion, representing 27.4 per cent of service revenue.

Group active customers increased 9.1 per cent, to 61.1 million, but active data customers grew 16.4 per cent, to 26.5 million

Vodacom said that its domestic LTE network now covers 34 per cent of the population (2,194 sites), while 3G population coverage is 94 per cent (8,407 sites).

Internationally, the operator said it had increased the number of 3G sites by 52.7 per cent in comparison to last year, and that the number of 2G sites was up 27.2 per cent.

International service revenue grew 7.6 per cent year-on-year, to ZAR3.98 billion, although quarter-on-quarter growth was slower (2.6 per cent).

Revenue from M-Pesa, the money transfer service, grew 28.2 per cent year-on-year, while the number of M-Pesa customers increased 29.7 per cent, to 7.6 million.

Joosub added that the operator is “continuing to work through the approvals process” for the acquisition of fixed-line provider Neotel in its domestic market.