Vodacom blames less load-shedding for small revenue growth

Vodacom recorded modest increases in revenues for the third quarter of its 2024 financial year, as significantly reduced load-shedding saw data traffic growth slow down.

Between October and December 2023, Vodacom increased its revenue in South Africa to R22.8 billion, 4.0% higher than during the same time in the previous year.

Vodacom said this was supported by strong growth in equipment revenue.

While it did not provide more details on what equipment drove sales, the period included the launch of sought-after devices like Apple’s iPhone 15.

Vodacom’s service revenue, which excludes equipment sales, grew 1.9% to R15.7 billion.

Vodacom said the relatively small growth reflected a strong comparative period for consumer mobile in the third quarter of 2022.

The operator expects service revenue growth in the fourth quarter to be stronger than the third quarter, thanks to an improved performance in Vodacom Business.

When it comes to the two main personal customer segments, the postpaid division performed best.

Mobile contract customer revenue increased 2.5% to R5.9 billion, supported by a price hike in the first quarter.

Vodacom also added 58,000 contract customers in the quarter, taking the total count for this segment up 1.6% to 6.8 million.

Prepaid revenue stunted by less load-shedding

Revenue in the prepaid segment only grew 0.7%.

Strong prepaid net additions increased the total base by 17.1% to 44.4 million, but the average revenue per prepaid user declined by 9.8% to R55.

Vodacom described the performance as “satisfactory” given the challenging macroeconomic backdrop and a strong comparative period associated with higher levels of load-shedding in 2022.

This is an interesting analysis of the results, as Vodacom and other mobile networks have typically blamed load-shedding for weaker performance due to decreased network availability and increased capital expenditure.

The mobile network has now blamed the reduction in the power cuts for its low prepaid revenue growth.

Vodacom explained its network availability supported above-trend data traffic growth during a period of heightened load-shedding in 2022.

Load-shedding hours during the quarter under review were around 40% lower year-on-year.

As a result, data traffic grew 31.0% in the latest quarter, “normalising” from higher growth rates in recent quarters as the extent of load-shedding moderated, Vodacom said.

Other trends in mobile data were as follows:

• Data customers increased 8.5% to 27.7 million, representing 67.6% penetration of Vodacom South Africa’s one-month active customer base.
• Smart devices on our network were up by 8.6% to 32.0 million, while the average usage per smart device increased 21.3% to 3.9GB per month.
• The number of 4G and 5G devices on our network increased 16.6% to 24.1 million. Prepaid data revenue of R3.3 billion in the quarter was up 10.5%.

Load-shedding now having the reverse effect on Vodacom’s revenue could possibly be attributed to increased network availability.

Previously, the power cuts would have left customers unable to access the network in more locations for more of the time.

After the upgrades, they were able to spend more time on their devices consuming data during the outages.

However, because there are fewer power cuts, customers may be spending less time on their devices and consuming content through other channels — like linear TV.

During the quarter, Vodacom spent R3 billion in the quarter, 13.2% more than during the previous period, to expand network capacity, manage energy resilience, enhance its IT platforms and leverage new spectrum acquired in 2022.

The operator said it was on track to spend around R11 billion on capital expenditure in the current financial year.

Service revenue in Vodacom South Africa’s other business segments performed as follows:

• Financial services — Increased 3.9% to R809 million, with a customer base of 14.6 million. Supported by 2.6 million insurance policies for contracts, devices, funeral and life cover.
• Vodacom Business— Decreased by 0.3% to R4.3 billion, with pressure on wholesale revenue. Results were impacted by a recalibration of spend by corporate customers for employees returning to their offices.
• Fixed services — Increased 8.5% thanks to good fibre revenue growth in both the consumer and Vodacom Business segments. Homes and businesses connected reached 183,904.

Across the entire Vodacom group, which includes its business in other African countries, Vodacom’s revenue and service revenue grew by 26.8% and 29.7%, respectively.

The high growth rates are primarily due to Vodacom’s acquisition of Vodafone Egypt, whose numbers were not included in last year’s results.

When including Egypt’s results, as if it had been acquired in 2022, the revenue growth would have been 9.6%.