Vodacom Integrated Report 2017

Challenging macroeconomic conditions

The challenging macroeconomic and market environment in each

of our operating countries is impacting consumer disposable

income, revenue growth and operating costs.

In South Africa, our largest market, the impact of the drought on

the agriculture sector and flat GDP growth rates have weakened

already poor employment opportunities and dented consumer

spending. Business confidence continues to be impacted by

political and policy uncertainty, and concerns regarding further

rating downgrades.

In our other operations, consumer spending-power has been

affected by rising taxes and interest rates, local exchange rate

depreciation, and a general increase in the cost of living. Sharply

depreciating currencies – particularly in Mozambique and

Nigeria – have widened exposure to foreign-denominated

expenses, impacting the rollout of low-cost devices, and

resulting in higher operating costs. Cost-efficiency measures

have been further constrained by inflationary pressures,

particularly in terms of wages and energy costs.

Implications for our strategy:

These continuing

challenges in macroeconomic indicators highlight the

importance of maintaining a strong efficiency drive, which we

have delivered through our cost-efficiency programme, as well

as providing targeted products and services across consumer

income groups. A key focus of our new strategy is on

developing segmented propositions, including specifically for

low-spend customers through initiatives such as Siyakha,

which seeks to promote digital inclusion in the emerging

prepaid segment.

Increasing regulatory intervention and

continuing policy uncertainty

We continue to engage with regulators across our operations, on

challenges that could impact revenue growth and cost efficiency.

Key regulatory and policy developments (by country) include:

South Africa:

The National Integrated ICT Policy White Paper;

deferring the ‘Invitation to Apply’ for licensing of spectrum bands

pending administrative judicial review proceedings; and the

amended ICT Sector BEE Codes.

Tanzania:

Mandatory listing requirements; national security and

customer SIM registration regulations; mobile financial services

licences and regulations; new taxation requirements; quality

of service regulations; and spectrum auction planned by end

of 2017.

DRC:

Communications Bill introducing changes to licence regimes;

national security and customer SIM registration regulations;

price floor and MTR regulation; temporary social media ban;

environmental approvals; and new taxation requirements.

Mozambique:

Communications Act introducing changes to

licence regimes; renewal of our 2G licence; spectrum auctions;

national security and customer SIM registration regulations;

and a review of mobile termination rates.

Lesotho:

Renewal of mobile service licence; approval of M-Pesa G2

hosting; quality of service regulations; cybersecurity legislation; SIM

registration regulations and mobile financial services regulations.

Further details on these legislative and policy developments are

available in our country performance reports.

Implications for our strategy:

Anticipating, informing and

responding to regulatory and policy developments requires

that we maintain a strong focus on developing positive and

constructive relationships with government and regulators.

vodacom

Regulatory report (2017).

www.vodacom.com

Mobile industry contribution

to global GDP

$3.3

2016

4.4%

GDP

$4.2

4.9%

GDP

2020

Source: GSMA Intelligence, The mobile economy 2017

Our business

Operating context

Delivering on our strategy

Our governance structure

Administration