Vodacom profit falls as domestic MTR cuts take hold

Vodacom, the South Africa-headquartered operator that is 65 per cent owned by Vodafone Group, blamed a drop in service revenues in its home market for a decline in net profit in the six months to end-September.

Profit fell 5 per cent year-on-year to ZAR6.3 billion (€450 million/$563 million) in the recent six month period, despite overall group revenues climbing 2.3 per cent and service revenues increasing 1.7 per cent. Vodacom relied entirely on its international operations for its service revenue growth in the recent six month period. The figure climbed 13 per cent year-on-year compared to a 1.3 per cent annual decline in South African service revenues.

Vodacom Group CEO Shameel Joosub said the lower domestic sales are primarily due to a 50 per cent reduction in mobile termination rates (MTRs) in the 2014 period, which resulted in a 42.4 per cent drop in interconnection revenues. Without the MTR reduction, domestic service revenue would have grown 2.9 per cent year-on-year.

"The impact of the lower MTRs was to reduce service revenue by almost a billion rand," Joosub explained. On the flip side, the group added "7.2 million customers to take out total customer base to 61 million," he said.

Joosub noted the operator is selling at least 40 million low-cost prepaid bundles per month, and that post-pay subscribers have reacted well to fixed price tariffs covering voice, data, and SMS.

Domestically, the operator "invested ZAR4.1 billion in the network" and added at least "1,000 new LTE base stations and 745 new 3G sites," during the period, the CEO added. Internationally, the operator increased the number of 3G by 44 per cent during the period.

Vodacom noted it added 1.1 million customers to its M-Pesa mobile money service in the six months to end-September, which took the number of active users to seven million.

For more:
- see Vodacom Group's earnings announcement [PDF]

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