Our performance
Governance review
Other
| Year ended 31 March | Year-on-year % change |
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| 2017 | 2016 | Reported | Normalised* | |||||
| Service revenue (Rm) | 16 775 | 17 763 | (5.6) | 2.2 | ||||
|---|---|---|---|---|---|---|---|---|
| Revenue (Rm) | 17 350 | 18 356 | (5.5) | 2.6 | ||||
| EBITDA (Rm) | 4 545 | 5 385 | (15.6) | (8.6) | ||||
| EBIT (Rm) | 1 648 | 2 296 | (28.2) | |||||
| Data revenue (Rm) | 4 113 | 4 019 | 2.3 | |||||
| Capital expenditure (Rm) | 2 833 | 4 090 | (30.7) | |||||
| Customers1 (thousand) | 29 655 | 27 127 | 9.3 | |||||
| Data customers2 (thousand) | 12 997 | 10 055 | 29.3 | |||||
Service revenue declined 5.6% (up 2.2%*) to R16 775 million, impacted by exchange rate volatility and the anticipated effect of the disconnection of customers, most notably in the prior year, in compliance with customer registration requirements in the DRC, Mozambique and Tanzania. Short-term pressure remains, with signs of improvement in Tanzania, very strong execution in Mozambique and Lesotho, but a challenging macro environment in the DRC. We have introduced ‘Just 4 You’ personalised offers across all our operations and take up is progressing well. M-Pesa continues to be a key area of growth.
Customers increased 9.3% to 29.7 million as the International operations have returned to positive net additions of 2.5 million in the year. We continue to improve our customer registration processes as we work closely with regulators to ensure full compliance in all our operations.
Data revenue grew 2.3% (9.4%*) to R4 113 million driven by a 29.3% increase in data customers to 13.0 million, reflecting strong demand for mobile data services in all our markets, offset by strong pricing competition, mainly in Tanzania and the DRC. We continue to focus on our commercial and network offering to drive data growth, ensuring customers have access to better low-cost smart devices, especially Vodacom-branded devices, increasing data network speeds and driving the adoption of data bundles. Improving monetisation of the substantial growth opportunity in data in all operations is a key priority for the next financial year.
M-Pesa revenue increased 19.4% to R1.9 billion, fuelled by expansion in the distribution channels and expansion of the products and services on offer. We added 3.7 million customers, increasing the number of customers to 12.9 million1. Tanzania launched an M-Pesa app for smartphones that has unique experiences such as QR code assisted payments, easier access to contacts, predefined amounts and integrates with the merchant payment platform. Mozambique has made significant progress in the year; 2.5 million customers representing 48% of its customer base are now using the M-Pesa service while Tanzania leads at 63% penetration of its customer base. The DRC has reached over two million customers as they focused on improving distribution. We have implemented a new M-Pesa platform in all operations except Lesotho with enhanced technology which has significantly improved stability, resulting in increased trust with customers which is a key attribute for success. The system continues to grow from its roots of person to person transfers, now also incorporating a complete merchant payment system, bill payments, a salary payment system, as well as savings and loans products for customers. In Tanzania alone, we now transact US$1 billion in value each month.
| 1. | Number of unique customers who have generated revenue related to M-Pesa in the past 90 days; of these 10.0 million have been active in the past 30 days. |
EBITDA declined 15.6%, normalised declined 8.6%* to R4 545 million and the EBITDA margin contracted by 3.1ppts to 26.2%. A number of actions to mitigate the impact of the slowed revenue growth in the year helped to offset the impact on margins. These included sales margin improvement through the promotion of own channels such as M-Pesa for recharge, restructuring to drive improved efficiencies and continued savings in network operating expenses through our ‘Fit for growth’ savings programme.
Capital expenditure of R2 833 million represented 16.3% of revenue. We continue to invest significantly in all our markets to strengthen network and service differentiation and to support data growth and wider voice coverage. We added 284 4G sites, 888 3G sites and 536 2G sites since March 2016.
| Year ended 31 March | ||||
| 2017 | 2016 | |||
| Revenue (TZSm) | 933 292 | 923 347 | ||
|---|---|---|---|---|
| EBIT (TZSm) | 97 260 | 107 200 | ||
| Customers1 (thousand) | 12 653 | 12 375 | ||
| Data customers2 (thousand) | 6 463 | 5 415 | ||
| MOU per month4 | 157 | 124 | ||
| Total ARPU5 (TZS per month) | 6 003 | 5 972 | ||
| Number of employees | 525 | 546 | ||
| NPS (position relative to competitors) | 3rd | 2nd | ||
| Customer market share#1 | 30.9% | 31.9%¥ | ||
Solid progress in most of our strategic priority areas enabled us to deliver a stronger second half performance, despite a highly competitive environment. In particular, our continued investments in data, M-Pesa and enterprise paid dividends by lifting customer and revenue growth in the second half of the year. Our investments to date have resulted in expanded coverage and a superior data network experience, placing Vodacom at the forefront of securing growth in mobile data. During the year, we launched high-speed 4G coverage across Dar es Salaam and produced impressive average download speeds which are over 60% faster than our next-best competitor. We continue to explore opportunities for spectrum acquisition which will enable us to rollout 4G into other regions.
In addition, we made data services more accessible by introducing affordably priced smartphones and attractive data propositions. This largely contributed to the 19.4% increase in active data customers who now make up 51.1% of our active customer base.
M-Pesa consistently delivered strong growth throughout the year despite the negative impact of excise duty increases imposed in July 2016. The continued expansion of our mobile money ecosystem helped fuel the 13.3% or 936 thousand increase in M-Pesa customers. M-Pesa revenue grew 11.2% to TZS249.6 billion, and now accounts for 27.3% of service revenue, up from 24.5% last year.
EBIT declined by 9.3%. The impact from slower revenue growth and greater network operating costs was limited by our vigorous focus on cost containment through our ‘Fit for growth’ programme, which improved operating leverage during the period, protecting EBIT margin from further compression.
Under Section 26 of the Electronic and Postal Communications Act, 2010 (as amended by the Finance Act, 2016), licensed telecommunications operators are required to issue 25% of their share capital through an initial public offering (IPO) to Tanzanians and thereafter list the said shares on the Dar es Salaam stock exchange (DSE). Vodacom Tanzania opened its IPO on 9 March 2017 and the offer period closed on 11 May 2017. The listing of shares is expected to take place in June 2017, subject to approval by the Capital Markets and Securities Authority (CMSA) and the DSE.
Looking ahead, we aim to maintain the encouraging momentum of the second half of the past year by continuing to focus investments across our key strategic drivers – data, M-Pesa, and enterprise – which are expected to yield strong growth. We will remain resolute in our quest to further enhance customer experience through both service levels and our network advantage while being cognisant of containing costs through our ‘Fit for growth’ initiative.
| Year ended 31 March | ||||
| 2017 | 2016 | |||
| Revenue (US$’000) | 407 413 | 429 605 | ||
|---|---|---|---|---|
| EBIT (US$’000) | 12 664 | 40 633 | ||
| Customers1 (thousand) | 10 388 | 8 527 | ||
| Data customers2 (thousand) | 3 705 | 1 996 | ||
| MOU per month4 | 49 | 39 | ||
| Total ARPU5 (US$ per month) | 4 | 3 | ||
| Number of employees | 617 | 613 | ||
| NPS (position relative to competitors) | 1st | 4th | ||
| Customer market share #1 | 38.9% | 37.1%¥ | ||
Vodacom DRC rebranded from blue to red and celebrated 15 years in the DRC. We also improved our NPS position to first from fourth place last year.
Following the loss of close to three million customers (25% of the customer base) in the prior year due to registration requirements, this was always going to be a tough year for us, as we worked to recover these customers during the year. Political instability and a deteriorating macroeconomic environment created a tough operating environment. The Congolese franc depreciated 45% against the US dollar and GDP growth slowed to an estimated 15-year low of 2.5%
Despite these negative impacts we continued to deliver on our strategic objectives. This was backed by further capital investment in the network, billing services and IT, which resulted in us improving to first position in our customer satisfaction measure, NPS. Revenue declined by 5.2% due to lower gross connections resulting from compliance with the customer registration requirements, an economic slowdown and further regulatory pressures.
Data customers increased 85.6% and data traffic increased 46.7%, underpinned by better device penetration. M-Pesa revenue growth of 66.9% was driven by an additional 1.2 million customers, resulting from our strategic focus on distribution. The EBIT decline was driven by various factors, including lower revenue, regulatory fee increases and customer-related acquisition costs. This was partially offset by the implementation of Vodacom’s ‘Fit for growth’ cost-savings initiatives, including headcount efficiencies, contract renegotiations and energy rationalisation.
The customer base increased by 21.8%, adding 1.9 million customers, close to recovering the number of customers disconnected in the prior year. This has largely been achieved through the deployment of the customer registration app and increased points of registration across the country.
In the year ahead, we will continue to execute on the rebranding nationwide, driving customer value management by reinforcing offerings such as ‘Just 4 You’, introducing a franchise model to increase our retail footprint, and improving key service level agreements in line with our CARE initiatives.
| Year ended 31 March | ||||
| 2017 | 2016 | |||
| Revenue (MZNm) | 14 641 | 11 896 | ||
|---|---|---|---|---|
| EBIT (MZNm) | 2 568 | 2 065 | ||
| Customers1 (thousand) | 5 146 | 4 826 | ||
| Data customers2 (thousand) | 2 280 | 2 112 | ||
| MOU per month4 | 121 | 104 | ||
| Total ARPU5 (MZN per month) | 216 | 169 | ||
| Number of employees | 485 | 466 | ||
| NPS (position relative to competitors) | 2nd | 1st | ||
| Customer market share #1 | 47.6% | 45.8%¥ | ||
Vodacom Mozambique delivered a solid performance this year maintaining double-digit revenue growth of 23.1% to MZN14.6 billion, despite challenging economic conditions that resulted in the metical depreciating 55.8% to the rand. We also felt the impact of customer disconnections to comply with customer registration requirements.
Voice revenue continued to grow strongly, up 18.6%. This was driven mainly by higher ARPU, as a result of increased usage and the 6.6% growth in customers. Significantly, data revenue has continued its upward momentum, increasing 38.5%, reflecting the increased demand for data services and the success of sales of Vodacom-branded smartphones; data revenue now contributes 23.0% to service revenue. Demand for our financial services offering continues to grow, with M-Pesa revenue increasing more than threefold. We now have 2.5 million M-Pesa customers who are benefiting from the migration to the new M-Pesa platform, which enables us to offer more services seamlessly.
EBIT growth was due to the strong revenue growth, but has been hampered by higher operating expenditure as a result of the foreign exchange movement. We have managed to reduce the impact on EBIT by delivering cost savings through the ‘Fit for growth’ programme, resulting in lower network costs and revised commission structures.
Our main focus for the year ahead is to reclaim our NPS leadership through network enhancement and to improve customer experience by delivering on our customer CARE initiatives. We will accelerate growth in data by increasing active data customers and increase smartphone penetration by moving subsidies to low-cost smartphones. We will grow the enterprise business through indirect channel acquisition of customers and by providing additional offerings to corporates on the Internet of Things, and we will continue to deliver EBIT growth through our ‘Fit for growth’ initiatives.
The Regulator intends to launch the spectrum auction during 2017. We await the publication of the resolution with the terms and conditions of the auction. We are also exploring alternatives to obtain additional spectrum.
The Regulator has applied a 50% reduction in mobile termination rates (MTRs) from MT0.86 to MT0.43 per minute from 1 January 2017 until the end of April 2017, and is expected to continue decreasing MTRs.
| Year ended 31 March | ||||
| 2017 | 2016 | |||
| Revenue (LSLm) | 1 116 | 1 027 | ||
|---|---|---|---|---|
| EBIT (LSLm) | 426 | 383 | ||
| Customers1 (thousand) | 1 468 | 1 399 | ||
| Data customers2 (thousand) | 549 | 532 | ||
| MOU per month4 | 82 | 75 | ||
| Total ARPU5 (LSL per month) | 61 | 62 | ||
| Number of employees | 207 | 202 | ||
| NPS (position relative to competitors) | 1st | 1st | ||
| Customer market share #1 | 90.9% | 87.7%¥ | ||
Vodacom Lesotho continued to grow strongly this year. Revenue increased 8.7% and we delivered an even stronger EBIT growth of 11.2%. The main contributor to revenue growth has been the increase in data revenue, which now contributes 24.4% of service revenue. Our bundle strategy helped us achieve a 34.2% decline in the average price per MB while delivering overall data revenue growth of 38.2%. We continue to drive smartphone penetration through the sale of Vodacom-branded devices at affordable price points.
We have seen significant growth in M-Pesa revenue, supported by the number of M-Pesa customers increasing 76.8%. This growth was the result of expanding the M-Pesa ecosystem by increasing ‘pay bill’ transactions, airtime purchases and bulk payments, such as salary payments, through M-Pesa, and enhancing the stability of the M-Pesa platform.
Our strong EBIT growth has been possible through delivering on our ‘Fit for growth’ initiatives, mainly by increasing sales (airtime and connections) through direct channels such as M-Pesa and retail stores.
Through our CARE initiatives, we continue to see improvements in call centre and retail KPIs, with service levels consistently reaching above 80%. We ended the year with a low 0.38% dropped-call rate. These initiatives assisted the recovery in NPS with a 5ppt gap to the competitor.
We continued to invest in the network, increasing 3G and 4G sites, as well as our fibre rollout. Significant capital was invested in developing our IT systems to build capabilities to enhance our customer value management propositions.
Looking to the year ahead, data monetisation remains a key priority as we aim to increase smartphone penetration through subsidies directed towards 3G/4G devices.
We are optimistic that our ability to offer contextually relevant offers through our ‘Just 4 You’ platform launched in November 2016, we will significantly improve customer experiences.
M-Pesa remains a key growth area. We have obtained Central Bank approval to implement a hosted M-Pesa platform with Vodacom South Africa. This will enable a deeper focus on customer value management with new technology and people capabilities built in.
