Our operating environment

Seizing the opportunities, mitigating the risks

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.

Mobile internet users

Source: GSMA Intelligence, The mobile economy 2018

Regulatory intervention and policy uncertainty

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.

Our strategy

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.


Source: GSMA Intelligence, The mobile economy 2018

Macroeconomic and political uncertainty

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‚Äôs 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.

Mobile industry contribution to GDP

Mobile industry contribution to GDP

Source: GSMA Intelligence, The mobile economy 2018