We have identified four significant trends that have a material impact on our business model. Our Vision 2020 strategy has been developed to ensure that we are best positioned to seize the opportunities and mitigate the risks associated with each of these trends.
The 'Fourth Industrial Revolution' – reshaping business models
Developments in Artificial Intelligence, Big Data analytics and blockchain technology – accompanied by the growth in connected homes, autonomous vehicles, smart cities and the Internet of Things (IoT) – are disrupting traditional business models, presenting a major source of business risk, as well as new opportunities for value creation.
Digitally connected consumers are becoming more activist customers, increasing their use of data and expecting highly-personalised interactions, while at the same time becoming very protective of data privacy.
Together, changing digital technologies and consumer expectations are transforming business sectors and challenging many traditional business assumptions; the digitisation of many industry sectors presents significant opportunities in particular for ICT companies.
In the mobile sector, the fastest growth area is in data, driven by increasing uptake of smart devices, improved networks, connected devices and the increased availability of data content. The greatest demand for mobile services is coming from emerging markets, where there is a young population base, higher economic growth, less fixed-line infrastructure, and significant further scope for mobile penetration.
Implications for our strategy
Our Vision 2020 – and our various strategic big bets – positions Vodacom to be a leading digital company, realising the substantial opportunities beyond our traditional revenue streams. We are rethinking our future networks and technology, redefining customer engagement, developing a company culture that attracts the best digital talent, and exploring innovative opportunities to drive positive social change in financial services, Enterprise, education, healthcare and agriculture.
We continue to face regulatory challenges across our operations, with
implications for revenue growth and cost efficiency. Significant regulatory
and policy developments (by country), include:
South Africa: The Electronic Communications Amendment Bill
and the associated delay in licensing of spectrum bands; and End-User
and Subscriber Service Charter Regulations by ICASA.
Tanzania: National security and customer SIM registration; mobile
financial services licences and regulations; tax revenue collection
systems; and mobile termination rates (MTR) review.
DRC: Communications Bill introducing changes to licence regimes;
national security and customer SIM registration regulations; MTR
regulation; temporary social media bans; and new taxes.
Mozambique: M-Pesa recapitalisation requirements; 2G licence renewal;
imminent spectrum auction; and national security.
Lesotho: Renewal of mobile financial services licence; national security
and customer SIM registration regulations; and VAT increase in FY2019.
Implications for our strategy
Anticipating, informing and responding to regulatory and policy
developments requires that we develop and maintain proactive
relations with governments, informed by mutual trust and respect, and
a shared understanding on the need for more inclusive economic
development. Our Vision 2020 strategy places a strong emphasis on
democratising data access, and empowering a connected society.
Further details on our regulatory matters can be found in
our Regulatory report.
A changing competitive landscape
The telecommunications and mobile sector continues
to be increasingly competitive, including non-traditional
new sources.
In our countries of operation there are typically two to five
mobile network operators (MNOs), each of which is seeking
strong competitive differentiation, through capital investment
in networks, sometimes an aggressive price play, enhancing
the customer experience for targeted segments, and/or
developing new digital offerings.
Over-the-top (OTT) services are prevalent in all markets. They have the effect of driving up data revenue, but also
affect services such as messaging and voice which substitutes revenue from these traditional services.
As we move towards being a digital enterprise, we are facing greater competition for new customers and employees from various non-traditional sources. These include new competitors, and potential collaborators, in the provision of technology, networks and infrastructure, and in the development and distribution of new digital products and services.
As we provide content services we will be competing and collaborating with new competitors in entertainment, gaming and music services.
Implications for our strategy
This growing competition, sometimes from unexpected
sources, underlines the importance of ensuring that we
are fast and flexible. Our Vision 2020 strategy aims to
harness digital to drive clear competitive differentiation
identifying opportunities for innovation, ensuring that we
proactively deliver the best customer experience, and
instilling an Agile culture across the organisation. In many
instances, we are identifying innovative opportunities for
collaboration and partnership for mutual benefit, rather
than traditional competition.
Challenging macroeconomic conditions in each of our markets is
impacting investment, consumer disposable income, revenue growth and
operating costs.
In South Africa, our largest market, we have felt the impact of flat GDP
growth rates, credit ratings downgrade, fiscal deterioration and volatile
exchange rates, coupled with the political uncertainty in the run-up to
the ANC leadership election in December 2017. The outcome of that
election, and subsequent change in the country’s political leadership,
led to some renewed business and investor confidence.
In our International operations, we are seeing an easing of inflationary
pressures in some markets, and evidence that economic growth is likely
to accelerate slightly. There is an increasing polarisation of politics across
most markets, with some of them facing election uncertainties. In all of
these markets telcos are facing sustained pressure from the introduction
of new taxes.
Implications for our strategy
Continuing challenges in macroeconomic indicators highlight the
importance of maintaining a strong efficiency drive, as well as
providing strategically segmented products and services across
consumer income groups, including those specifically aimed at
low-spend customers. In South Africa we are seeing strong uptake in
our Siyakha platform, while our M-Pesa mobile money offering
continues to deliver strong growth across our International operations.
We believe our strategic big bets are well placed in the context of the
current and anticipated macroeconomic environment.
