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Vodacom capitalises on increased mobile, fixed traffic in South Africa

Vodacom has benefitted from strong growth in South Africa, amid increased customer demand during the lockdown period. At the same time, the company’s international operations were negatively impacted by lower economic activity from the effects of COVID-19.

This is according to the operator’s latest trading update for the quarter ended 30 June 2020.

The company stated that its South Africa service revenue growth was solid at 6.4% for the quarter, supported by strong demand for data and connectivity services in the period.

While international service revenue grew by 10.7% benefiting from the rand devaluation, underlying performance was subdued with a 5.3% decline, as a result of lower economic trading activity, free M-Pesa services and customer registration requirements in these businesses.

Vodacom Group CEO Shameel Joosub.
Vodacom Group CEO Shameel Joosub.

Shameel Joosub, Vodacom Group CEO commented: “In South Africa, the combination of increased demand for data following significant tariff reductions of up to 40% effected on 1 April and more people working and being educated remotely, resulted in a significant increase in mobile and fixed traffic in the first quarter.”

In response, the company said it accelerated network infrastructure spend by R500-million to R2.7 billion in Q1 and used the temporary assignment of spectrum by the Independent Communications Authority of South Africa (ICASA) to rapidly increase network capacity.

“The temporary spectrum assignment also allowed us to fast track the launch of South Africa’s first mobile 5G network and our fixed 5G commercial service,” Joosub added.

He explained that strong demand for voice, data and financial services contributed to the 6.4% increase in service revenue growth in South Africa while the company’s international portfolio benefited significantly from currency changes to grow service revenue by 10.7%.

This resulted in a 7.6% increase in service revenue across the Vodacom Group despite tougher economic trading conditions in most of its markets.

“Excluding currency gains, underlying growth in our International portfolio declined by 5.3% as economic activity declined across these operations. We also reduced pricing on a temporary basis on a number of M-Pesa transactions to assist customers in contactless payment in light of social distancing initiatives,” said Joosub.

In its statement released to the media, Vodacom underlined the significance of partnerships established within the healthcare and education industries, and mentioned the National Department of Health, Discovery Health, Microsoft and Alipay.

“In terms of the partnership, Vodacom Financial Services will work closely with Alipay to develop a single, affordable payments app for both customers and merchants that promotes greater financial inclusion within the communities in which we operate,” said Joosub.

“While I am particularly pleased with the performance of our South African business, we remain cautious about the impact of COVID-19 on our operations and uncertainty about the pace of economic recovery in each of the countries where we operate as disposable income will increasingly come under pressure as a result of rising unemployment and reduced economic activity. That said, we are fully focussed on delivering great value and an exceptional experience to our customers and committed to a prudently sustainable investment programme that continues to yield positive results,” Joosub continued.

According to Vodacom, the long anticipated award of high-demand spectrum in South Africa remains instrumental in the data pricing dynamic in its largest market.

Joosub added: “Lengthy delays in completing the digital migration and allocating 4G spectrum continues to curb the pace at which data prices could have fallen. ICASA is expected to complete its spectrum allocation process by December 2020.”

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