Bloomberg News

Vodacom to Boost Sales Contribution From Beyond South Africa

July 19, 2012

Vodacom Group Ltd. (VOD), the largest provider of mobile services to South Africans, plans to almost double the share of revenue from other countries within four years, according to Chief Executive Officer Pieter Uys.

“We’re running our African businesses much better than two years ago,” Uys said in a phone interview from Johannesburg today. “That is now paying off.”

Vodacom, 65 percent-owned by Vodafone Group Plc (VOD), spent 37 percent more on capital investments in the year through March to expand capacity on its networks. Sales from Tanzania, the Democratic Republic of Congo, Mozambique and Lesotho should increase to 30 percent of total revenue by 2016, from 18 percent now, the CEO said.

The provider of wireless services said today that it boosted customer numbers 29 percent to 50 million in the fiscal first quarter even as smaller competitors tried to lure away business in its home market by offering discounts. Sales advanced 9.3 percent to 17 billion rand ($2 billion) in the three months through June compared with a year earlier.

Vodacom rose 2 percent to 91.84 rand, the biggest increase in almost two months, at the close of trading in Johannesburg.

Vodacom has said it plans to maintain capital expenditure at 11 percent to 13 percent of revenue for the next four years. The strength of the network fends off competitors offering lower prices, and will help the company grow outside its home market, Uys said today.

Turnaround Success

“Over the last couple of years we’ve worked hard turning around those businesses,” Uys said. “We’re increasing our investments in those markets and growing.”

Vodacom intends to lead a doubling of mobile-phone penetration in the Congo, where only 20 percent of people use wireless devices, Uys said. The company is fighting a court- enforced order to confiscate and sell its 51 percent stake in a Kinshasa-based subsidiary. Vodacom increased its Congo customer base by 47 percent in the last quarter from a year earlier, to 6.2 million users.

Vodacom and MTN Group Ltd. are facing price competition from smaller operators such as Cell C (Pty) Ltd. and Telkom SA Ltd. (TKG)’s 8ta mobile division that are using discounts to attract customers.

The network’s “quality and capacity both set Vodacom apart and give us the means to compete with targeted value promotions,” Uys said today.

Discount Competition

Cell C, headed by a former Vodacom chief executive officer, introduced low-cost voice packages in May in an attempt to boost market share. Telkom’s 8ta, which started in 2010, said last month that it more than tripled mobile-phone subscribers in the year ended March 31 to 1.5 million customers. It plans to win 15 percent of the market by 2016.

“Those have not had an effect on our voice business” Uys said today.

Vodacom said 15.7 million customers are actively using data, a 43 percent increase from a year ago. Data sales contributed 15.4 percent to total service revenue. The company increased its M-Pesa money transfer customers by 121 percent to 3.6 million in Tanzania, it said.

Uys, who has worked at Vodacom since its founding in 1993, announced July 5 that he will leave the company in March 2013. Shameel Joosub, the CEO of Vodafone Spain, will become co-CEO this September.

To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at sikonathim@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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