At a glance South Africa

At a glance

South Africa

  Year ended 31 March   % change  
  2016   2015   15/16  
Service revenue (Rm) 49 320   47 032   4.9  
Revenue (Rm) 62 279   59 203   5.2  
EBITDA (Rm) 25 016   22 837   9.5  
EBIT (Rm) 19 430   17 779   9.3  
Data revenue (Rm) 17 287   13 538   27.7  
Capital expenditure (Rm) 8 747   8 646   1.2  
Active customers 1 (thousand) 34 178   32 115   6.4  
Prepaid customers (thousand) 29 265   27 202   7.6  
Contract customers (thousand) 4 913   4 913    
Active data customers 2 (thousand) 18 704   16 595   12.7  
IoT connections 3 (thousand) 2 264   1 766   28.2  
Total ARPU 5 (rand per month) 112   113   (0.9)  
Prepaid ARPU (rand per month) 63   66   (4.5)  
Contract ARPU (rand per month) 397   380   4.5  
Number of employees 5 009   5 228   (4.2)  
NPS #1 54 ^   58      
Service revenue market share (%) #1 50.4 ^   51.8 ¥      

Our 2016 performance

Service revenue increased 4.9% to R49 320 million as the business returned to growth following the 50% cut in mobile termination rates (MTRs) last year. Revenue grew at 5.2% to R62 279 million, underpinned by a 6.2% increase in equipment revenue following the sale of 10.5 million devices, 61.6% of which were smart devices.

Data revenue increased 27.7% to R17 287 million as strong growth in the demand for data continues. Data traffic growth of 46.8% was underpinned by three success factors:

  • Improved access to more affordable devices – active smart devices on the network increased 22.8% to 14.2 million, driven mainly by the sale of low cost Vodacom branded devices, which account for 25.7% (2015: 16.8%) of total device sales.
  • Increased data coverage – the number of active data users on the network expanded 12.7% to 18.7 million customers.
  • Our compelling data offers through ‘Just 4 You’ – this propelled growth in data bundle sales by 85.9% with average monthly data usage increasing 49.8% to 350MB per customer; we continue to see good ARPU growth with customers migrating from 2G to 3G and 3G to LTE/4G, growing by 20.5% and 19.7% respectively.

EBITDA increased 9.5% to R25 016 million, with strong revenue growth and EBITDA margin expanding 1.6 ppts to 40.2% due to a strong focus on cost efficiencies. Growth was impacted by a R531 million foreign exchange gain (2015: R114 million loss) which has been offset by a one-off BEE charge of R128 million included in staff expenses in the current year, and a R308 million voucher release in the previous year. At an individual employee level, we have instilled a cost-conscious culture across the business, driving good progress through our ‘Fit for growth’ cost savings programme. Total expenses grew 2.5%, well below revenue growth of 5.2%. We have made several structural changes to deliver cost containment, such as optimising SIM card distribution costs and buying back our customer bases (from Nashua Mobile (Pty) Limited in the prior year, and more recently from Altech Autopage (Pty) Limited), which has reduced ongoing commissions paid. Other cost savings initiatives included optimising network operational costs through maintenance contract renegotiations, self-providing more of our transmission services, and outsourcing our network maintenance staff to realise scale benefits.

Capital expenditure of R8.7 billion allowed us to substantially widen 3G and LTE/4G data coverage, improve voice quality and increase data speeds. We have more than doubled the number of LTE/4G sites in the year to over 6 000 sites, and extended our high-speed transmission to 89% of our sites. Vodacom claimed top spot in MyBroadband’s 2016 War Drive, which tested the download speeds of South Africa’s mobile operators’ mobile data networks. Our fibre deployment has started gaining traction as we accelerate deployment to more estates. We have also focused more of our capital spend on new billing systems to allow us to transition from a predominantly mobile company to a unified communications provider, giving us a 360 degree view of our customers. We aim to complete the migration of our contract customers by the end of this year.

Active customers increased by 6.4%, with 2.1 million new customers in the year. The ARPU trend improved largely as a result of lower declines in voice revenue, with customers opting for the more attractively priced ‘Just 4 You’ offers. This was accompanied by a continued increase in data revenue as customers traded up to either 3G or LTE/4G devices. Total ARPU declined 0.9% year-on-year to R112. Adjusting for the prior year voucher release of R325 million, ARPU was almost flat, down 0.1%. We have seen great success with the next evolution in our bundle strategy, with personalised offers through our ‘Just 4 You’ campaign optimising customer spend while achieving ARPU uplift. Prepaid bundle purchases increased to over 1 billion. Active prepaid customers increased 7.6% to 29.3 million. We have migrated 85% of contract customers to new price plans with better value offerings. As a result, contract in bundle spend increased to 71.3% (2015: 69.3%). Active contract customers were flat at 4.9 million. Contract churn fell from 9.2% a year ago to 8.5%, while contract ARPU increased 4.5% to R397.

Enterprise continues to deliver strong growth, as we leverage network reliability and our leading mobile brand to move more deeply into fixed-line. Enterprise service revenue (including mobile) now contributes 22.8% of South African service revenue. Fixed-line and business managed services increased 26.5% year-on-year and now comprise 14.9% of total Enterprise service revenue. Growth was supported by the increased demand for fixed services as customers sign up for cloud solutions such as SAP HANA software and Microsoft Office 365. We entered into a strategic partnership with IBM in the second half of the year to provide hosting solutions and the first global cloud in Africa. Our collaboration with IBM, our extensive fixed and mobile infrastructure, our pan-African and global footprint, and our investment in data centre infrastructure, provides the ideal platform to deliver cloud services to large and multinational enterprises. Internet of Things (IoT), previously called machine-to-machine, connections increased 28.2% to 2.3 million.

 Our commitments

We will continue to make the investments needed to diversify our revenue streams and achieve our ambitious revenue growth targets for data, enterprise, fibre and new services. A priority focus will be on securing access to spectrum in South Africa. We increase our rollout of fibre, drive demand for our enterprise and content services, and maintain a strong focus on pricing transformation, data monetisation and the customer CARE initiative, while at the same time ensuring further progress in cost efficiencies. We will continue our strategy of taking a segmented consumer view, personalising consumer offers through ‘Just 4 You’, and offering smaller-sized bundles.