48 / 102
44
Vodacom Group Limited
Integrated report for the year ended 31 March 2017
CFO’s
review
Till Streichert
This has been a solid year of execution for the Group,
meeting our strategic goals and delivering returns for
shareholders by focusing on achieving our key
objectives: continued network infrastructure
investment, personalised products and segment
offerings, and targeted revenue growth in data,
M-Pesa and enterprise, while maintaining a clear
focus on cost efficiency.
The Group delivered good results despite a tough operating
environment. Group revenue increased 1.5% (3.4%*) this year to
R81.3 billion, with service revenue up 2.3% (4.4%*) to R68.3 billion.
In South Africa, we have seen continued growth in service revenue
of 5.6%, driven largely by a growing demand in data, supported by
our network infrastructure investment, successful pricing strategy
execution and strong customer growth, with three million new
customers. Service revenue declined in our International operations
by 5.6% (up 2.2%*) to R16.8 billion, impacted by customer
registration requirements, tough economic conditions and
exchange rate volatility in some of our markets. We added
2.5 million customers throughout the year by rebuilding our
customer base following the change in customer registration
requirements in three of our four markets. Group EBITDA grew
2.9% (7.1%*) to R31.2 billion, and we delivered strong operating
free cash flow growth of 18.4% to R19.6 billion.
Strong foundation in network superiority
Network superiority is at the heart of Vodacom’s strategy of
ensuring excellent quality for our customers. This year, in line with
our guidance, we invested R11.3 billion mainly in the network and IT
(representing 13.9% of Group revenue), adding to the R26.2 billion
spent in the previous two years. This illustrates our continued
commitment to drive communication infrastructure development
across all the countries we operate in. We continued to increase our
2G, 3G and 4G coverage, improve voice quality and increase data
speeds. In South Africa, we further extended our high-speed
transmission to 92.1% of our sites, and completed the development
of our new customer management and billing systems to future
proof our operations, having migrated all of our consumer contract
customers to this new platform. We also entered into a commercial
agreement with WBS which will enable us to roam on their
4G network. Our investment into new growth areas like IoT, FTTx,
big data and video services is preparing us for the next evolution in
telco, assisting us to continue to deliver good returns to our
shareholders.
Monetising data and growing M-Pesa
Group data revenue increased 16.4% to R24.8 billion, following
strong demand for data. Data traffic grew 46.7% supported by
improved affordability of both devices and data bundles. Data
revenue now constitutes 36.3%^ of service revenue, up from
31.9% a year ago. In South Africa, data customers were up 8.3% to
19.5 million, while in the International markets data customers were
up 29.3% to 13.0 million. In South Africa, the average monthly data
used by customers on smart devices continued to increase, this
together with incentives to migrate to better data devices, resulted
in benefits to ARPU. There was an ARPU uplift of approximately 25%
when a customer migrated to a 4G device. Improvements made to
our out-of-bundle notification system, coupled with segmented
propositions, including micro bundles, resulted in data being more
affordable to customers.
Customers across our International operations have enthusiastically
embraced our mobile payment solution, M-Pesa. The security
and convenience in the solution has seen a 40.1% increase in
customers to 12.9 million, delivering a 19.4% increase in revenue
to R1.9 billion. This service has also resulted in more airtime
recharges via M-Pesa driving customer loyalty and the
commensurate savings in commissions.
We believe that we can still improve further on monetising the data
opportunity, particularly in all our International operations, which
will be a key priority for the next financial year as data demand
continues to grow.