Vodacom Reports H1 649409

African operator reports total customers increased by 22.6% to 31.6M; net profit increased by 17.5% to R3.7B

November 19, 2007

5 Min Read

JOHANNESBURG, South Africa -- HIGHLIGHTS

  • Total customers increased by 22.6% to 31.6 million

  • Customers increased by 15.3% to 23.3 million in South Africa

  • Customers increased by 41.8% to 3.7 million in Tanzania

  • Customers increased by 56.8% to 3.2 million in the DemocraticRepublic of Congo

  • Customers increased by 39.5% to 332 thousand in Lesotho

  • Customers increased by 55.5% to 1.1 million in Mozambique

  • Revenue increased by 17.2% to R22.8 billion

  • Profit from operations increased by 15.1% to R5.7 billion

  • EBITDA increased by 15.5% to R7.6 billion

  • Net profit after taxation increased by 17.5% to R3.7 billion

  • Cash generated from operations increased by 26.1% to R6.9 billion

  • Interim dividend declared in October 2007, increased by 10.0% toR2.75 billion



COMMENTARY

Vodacom Group (Proprietary) Limited, South Africa’s market leaderin the provision of cellular services announces interim resultsfor the six months ended September 30, 2007.

SOUTH AFRICA

Customers

The total number of customers increased by 15.3% to 23.3 million(September 30, 2006: 20.2 million) for the six months endedSeptember 30, 2007. The number of prepaid customers increased by13.5% to 19.8 million, while the number of contract customersincreased by 27.4% to 3.4 million.

It is Vodacom’s policy to disconnect inactive prepaid SIM cardsafter seven months without a revenue generating activity on theVodacom network, e.g. making or receiving a call, sending orreceiving an SMS or transmitting data. Network activities relatingto call forwarding to voicemail are classified as revenuegenerating activities. Since implementing this rule, prepaid SIMcards remaining in an active state on the network, with only callforwarding to voicemail and no other revenue generatingactivities, increased significantly. It has therefore been decidedto implement a supplementary disconnection rule that willdisconnect inactive prepaid SIM cards after 13 months of beingkept in an active state, by call forwarding to voicemail only, andnot having had any other revenue generating activity on Vodacom’snetwork.

The implementation of the supplementary disconnection rule has ledto the disconnection of an additional 2.9 million prepaid SIMcards in September 2007, increasing churn on the prepaid customerbase to 51.9% for the period under review. This rule change isexpected to increase prepaid churn, but provides a betterreflection of active prepaid SIM cards on the network and henceresults in a higher average revenue per user (ARPU).

The implementation of this supplementary rule has no impact on thefinancial performance of Vodacom South Africa.

Contract gross connections increased by 32.8% to 425 thousand(September 30, 2006: 320 thousand), while prepaid grossconnections increased by 9.9% to 5.4 million (September 30, 2006:4.9 million), bringing the total number of connections for the sixmonths ended September 30, 2007 to 5.8 million (September 30,2006: 5.3 million). The growth in contract connections was largelydue to the 3G/HSDPA mobile data card connections increasing by170.2% to 149 thousand (September 30, 2006: 69 thousand) customersand 104 thousand (September 30, 2006: 132 thousand) customers thatconverted from prepaid to contract packages.

ARPU

During the period under review, ARPU decreased to R119 (September30, 2006: R124) per month due to the continued dilution caused bythe higher proportion of lower ARPU prepaid and contractconnections made as the lower end of the market is penetrated.The contract customer ARPU decreased by 7.8% to R487 (September30, 2006: R528) when compared to the six months ended September30, 2006, while prepaid customer ARPU decreased by 3.3% to R59(September 30, 2006: R61) per customer per month, for the sameperiod.

Community services ARPU decreased by 30.1% to R711 (September 30,2006: R1,017) per month.

Churn

Through the continued high level of handset support and animprovement in service to customers, Vodacom maintained a very lowcontract churn of 8.3% (September 30, 2006: 11.0%) for the sixmonths ended September 30, 2007.

The prepaid churn is currently at 51.9% (September 30, 2006:47.7%) for the six months ended September 30, 2007, which includesthe implementation of the supplementary disconnection rule.

Traffic

Total traffic on the network, excluding the impact of national andinternational roaming, showed an increase of 14.0% to 11.0 billionminutes (September 30, 2006: 9.7 billion) for the six months endedSeptember 30, 2007. This growth was mainly due to the 15.3% yearon year growth in the total customer base from 20.2 million to23.3 million.

Estimated market share

Vodacom’s leadership in the highly competitive South Africanmobile communications market decreased to an estimated 56% marketshare on September 30, 2007 (September 30, 2006: 59%). Thecellular industry in South Africa increased in size by anestimated 21.5% in the last six months, of which Vodacom hascontributed approximately 42.0%. The market penetration, by SIMcard, of the cellular industry is now an estimated 86.8%(September 30, 2006: 72.2%) of the population.

NON-SOUTH AFRICAN OPERATIONS

Vodacom’s non-South African operations provide a world-classglobal system for mobile communications (GSM) service to 8.3million customers. Profit from these operations increased by115.9% to R352 million.

Vodacom Tanzania

The Tanzanian market remains very competitive with the estimatedmobile penetration rate of the country increasing from 12.6%(September 30, 2006) to 17.3% as at September 30, 2007. VodacomTanzania’s estimated market share decreased slightly to 54%(September 30, 2006: 55%) at September 30, 2007. The customer baseincreased by 41.8% to 3.7 million (September 30, 2006: 2.6million) whilst gross connections increased by 36.6% to 1.2million (September 30, 2006: 909 thousand).

Vodacom Congo

Vodacom Congo remained the market leader with an estimated marketshare of 44% (September 30, 2006: 49%) at September 30, 2007under challenging circumstances. The estimated mobile penetrationrate increased substantially to 11.0% (September 30, 2006: 6.6%)as at September 30, 2007. The growth achieved in the customerbase of 56.8% to 3.2 million (September 30, 2006: 2.0 million)customers as at September 30, 2007 is a direct result of increasedcoverage in strategic areas and the implementation of an improvedsales and distribution strategy.

Vodacom Lesotho

Vodacom Lesotho is well positioned to counter any competitiveactivity and has retained its market share of 80% as at September30, 2007 for more than three years running. The estimated mobilepenetration rate has grown to 22.1% (September 30, 2006: 14.7%) asat September 30, 2007 on the back of strong growth in the customerbase of 39.5% to 332 thousand (September 30, 2006: 238 thousand).

Vodacom Mozambique

Although Vodacom’s estimated market share has grown to 38%(September 30, 2006: 33%) on the back of strong growth in thecustomer base of 55.5% to 1.1 million (September 30, 2006: 694thousand) customers, ARPUs remained low and the annualised churnwas high at 57.3% (September 30, 2006: 41.8%).

Vodacom Pty. Ltd.

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