African markets such as Tanzania, Mozambique and the Democratic Republic of Congo (DRC) are outpacing South Africa regarding revenue percentage growth for mobile network Vodacom.

This is clear from the group’s Wednesday release of its financial results for the third quarter ending December 2013, which point to sluggish service revenue growth of 0.6% year-on-year in the more mature South African market to reach R12.58 billion.

This is compared to Vodacom’s rest of Africa service revenue growth of 32.6%, or at a normalised rate of 15.1 %, which has resulted in this category topping R3,69 billion for the period.

Total group revenue increased 10.5% -- 7.9% on a normalised basis -- to R20.2 billion for Vodacom, while overall service revenue increased 6.4% to R16.2 billion, up 3.4% on a normalised basis.

Vodacom says that service revenue growth of 0.6% in South Africa is owing to strong take-up in data and prepaid offerings. Vodacom further reports that the number of smartphones on its network has grown by 600,000 to reach 7.2 million in South Africa.

However, lower mobile termination rates (MTRs) in South Africa led to a local 24.1% decline in interconnection revenue for the operator. And if the lower MTRs had to be excluded, Vodacom says its service revenues grew by 3.4% in South Africa.

But a 22.8% growth in active customers to 25.0 million in Vodacom’s rest of Africa markets helped the firm score good growth in these markets. This means that rest of Africa subscribers make up 44.7% of Vodacom’s overall subscriber number of 56 million.

Vodacom cites “the success” of its “street vendor channel, expanded network coverage and competitive bundled offers” as factors driving its African growth.

“Our pricing transformation continued with integrated tariffs now available in all our markets,” says Vodacom, referring to its rest of Africa operations.

“Despite increased price competition in DRC and Mozambique and a general market slowdown in Tanzania, voice revenue increased 18.1% from a 21.4% increase in outgoing traffic.

“Data revenue grew 110.5% (including M-Pesa revenue) supported by 59.4% growth in active data customers to 7.5 million. 29.8% of the active customer base currently use data, compared to 23.0% a year ago,” says the company.

Vodacom adds that its data traffic is three times bigger than it was a year ago in its rest of Africa operations, while active users of its mobile money service M-Pesa increased 24.5% to reach 5.8 million.

“In Tanzania, our most developed M-Pesa market, M-Pesa revenue grew 59.0% to contribute 19.1% of service revenue. Additionally, 25% of total Vodacom Tanzania airtime is now purchased using M-Pesa. Following the launch of M-Pesa in all our international markets, our priority is to increase the number of registered users and to drive activity levels by widening distribution and expanding the ecosystem in each market,” says the company.

‘Room for East African growth’

An analyst says that Vodacom may increasingly look to Africa to accelerate its revenue growth.

“There is room for expansion in East Africa,” Danson Njue, an East Africa analyst with Informa Telecoms & Media, tells ITWeb Africa.

Njue further explains that Ethiopia, in particular, is on Vodacom’s radar.

Ethiopia has one of Africa’s biggest populations of over 90 million people, but the country has one of the lowest mobile usage rates in the world at just 25% according to BuddeComm research.

This is largely owing to the telecoms market being monopoly run by Ethio Telecom.

“Ethiopia is a key market that Vodacom has openly shown interest to invest. Its latest move to set up a representative office in Addis Ababa may be interpreted as a tactical in trying to learn the market as it waits for the telecoms market to be open for competition,” said Njue.

Lehlohonolo Mokenela, ICT research analyst at Frost & Sullivan’s Cape Town offices, agrees with Njue that Vodacom is increasingly setting its sights on Ethiopia.

“That could be an important market in the longer term when the Ethiopian government liberalises the market,” Mokenela tells ITWeb Africa.

But Mokenela explains that Vodacom could look to mobile money services to boost its growth in Africa as well.

“The international operations, led by Vodacom Tanzania have shown substantial growth over the last two years, particularly on the data side. The expansion of its M-Pesa business could hold the key to growth in data revenue from international operations,” Mokenela says.