South African mobile phone operator Vodacom experienced a 5% drop in first-half earnings, attributed to the impact of a local reduction in interconnection rates according to Reuters Africa.

Diluted headline earnings per share is said to have fallen to 415 cents per share in the six months to end-September claims the report. This was down from 438.1 cents a year ago.

This drop has been linked directly to a move by the Operator early in 2014 to cut its mobile terminal rates (MTR) or the rates charged by mobile operators to connect calls by half.

In a statement Vodacom said that both its Group Revenue and service revenue increased by 5.0%, with strong growth in Group data revenue of 24.7% and active data customers up 27.6% to 25.9 million.

Shameel Joosub, Vodacom Group CEO, said, "We have faced tough macroeconomic conditions in all markets, increased competitive intensity, and have also seen a significant impact from lower mobile termination rates ('MTRs') in South Africa. Against that backdrop Vodacom performed well, adding 7.2 million customers to take our total customer base to 61 million and increasing revenue by 2.3% to R37.5 billion.,

The impact of the lower MTRs was to reduce service revenue by almost a billion rand. Excluding this, South Africa would have seen service revenue growth of 2.9%. In order to help offset the impact of lower MTRs we have continued to implement a range of cost management programmes."

Richard Boorman, Executive Head, Corporate Communications at Vodacom, said that the Group was looking more closely at operator expenses and the cost of transmission in terms of fibre connectivity to base stations.

"In terms of direct costs, we're looking at acquisitions and retentions," he said.

Regarding the Group's HR component, Boorman reiterated a quote from Joosub who had said that the Group was "appropriately sized".

The mobile operator says it has invested in R4.1 billion in the network in South Africa and added over 1000 new LTE base stations as well as 745 new 3G sites.