Vodacom Integrated Report 2016

Vodacom Group Limited

Integrated report for the year ended 31 March 2016

Our operating

environment

Material issues impacting value

We strategically prepare for the impacts described below by ensuring that our products and offers

provide value across our customer base, while continuously driving improved value to our customers.

We have experienced tougher macroeconomic and market

environments across our operating countries. Real GDP growth

estimates

for 2016 in each of the countries were as follows:

South Africa 0.4%, Tanzania 6.5%, the DRC 5.0%, Mozambique

4.2%, Lesotho 2.0%, Nigeria 2.1% and Zambia 3.1%. Although GDP

growth was suppressed across our operations, countries are still

delivering a reasonable growth rate. Most countries have, however,

been impacted by larger than normal local exchange rate

depreciation, which has in turn has caused rising inflation, higher

interest rates and increased taxation. Collectively, this has resulted

in depressed consumer spending. We have sought to counter this

through the introduction of more relevant products that provide

personalised value to our customers. In South Africa, business and

consumer confidence has been very low throughout the year.

Although the sharp depreciation in currencies has put pressure

on our foreign denominated cost base, we have successfully

managed to weather this impact through our ‘Fit for growth’

cost-cutting programme. The stability of the currencies going

forward remains a risk.

Challenging macroeconomic conditions

We continue to face important regulatory changes and potential

policy uncertainty across our operations, with implications both

for revenue growth and cost efficiency:

South Africa:

There remains uncertainty regarding the timing

and process for licensing of high-demand spectrum bands,

critically needed to meet significant demand growth for data.

The Ministry has indicated its intent to publish new Spectrum

Policy Directives through the draft ICT Policy White Paper. This

is key to achieving the South African Government’s 2020 goal

of broadband for all as part of the National Development Plan.

Tanzania:

The Regulator has completed 700MHz digital

dividend migration and has stated its intentions to undertake

an auction next year. Significant regulatory developments

include: mobile customer registration; quality of service

obligations; a Finance Bill that sets taxes; the implementation

of Central Equipment Identification Registration and Mobile

Number Portability in June and August 2016 respectively; and

the new National Payment Act requiring mobile financial

services providers to apply for licences by 1 July 2016 to

replace previous letters of no objection issued by Central Bank.

Listing regulations require companies to list 20% or pay 0.6%

of gross revenues into a sector development fund. We have

elected to pay and not list.

DRC:

In December 2015, Vodacom DRC’s 2G licence was

renewed until 1 January 2028 and additional 1 800MHz

and 1 900MHz spectrum was secured. Other regulatory

processes include: retail price floor and mobile termination

rate regulations; Finance Act 2015 increasing sector

taxation; mobile customer registration; lawful interception

requirements; and a consultation on a new

telecommunications bill.

Mozambique:

A new communications law was

passed in May 2016, and will require Vodacom

Mozambique to convert its existing licences to new

technology neutral licence regime. The Regulator has

completed 800MHz digital dividend migration and has

stated intention to auction spectrum this year. Other areas

of regulatory activity include mobile customer registration

and a Mobile Termination Rate review.

Lesotho:

Vodacom obtained additional 1 800MHz spectrum to be

used for LTE/4G in February 2016, and secured renewal of its mobile

service licence for 20 years from 1 June 2016. Other regulatory issues

include: a new three-year mobile termination rate regulation from

October 2015 and consultations on new quality of services

regulations; e-money regulations; and the introduction of customer

registration regulations.

Customer registration

All our markets are subject to mobile customer registration

requirements, the industry is engaging with authorities to improve

the process to ensure registration. Difficulties experienced in the

registration process include: limited number of national identity cards;

the inefficiency of a paper-based process; and the inability of mass-

market distribution partners to complete the registration processes

correctly. Tanzania and Mozambique have replaced the paper-based

process with an electronic registration process. We are continuing

to actively register customers, work with authorities to improve

verification of customer registration information, and have action

plans in each country to achieve full compliance.

For our regulatory report 2016 go to

www.vodacom.com

vodacom

Increasing regulatory intervention

South Africa Consumer Confidence Index

Jul 2013

(1)

Jan 2016

(8)

(6)

Jan 2014 Jul 2014 Jan 2015 Jul 2015

(7)

(4)

(15)

(5)

(14)

(9)

Source: Bureau for Economic Research (BER).

1. Bureau for Economic Research (BER) and the Economist Intelligence Unit (EIU).