SMS decline begins

Vodacom results announced today revealed the first decline it has yet reported in SMS revenues in South Africa, while data growth continued to outpace voice.

Vodacom has reported a 6.9% jump in Group revenue for the six months to the end of September 2012, over the same period a year before. The increase in September 2011 had been 6%. In South Africa, however, growth has been a mere 1.3%, reaching R23,8-billion, after 4.7% growth had been reported a year before.

Slowing growth was attributed to ‚”reduced mobile termination rates (MTR) and on-going competitive pressures‚”. Service revenue growth in South Africa would have been 4.0% if the cuts in the MTR or interconnect fee had been excluded.

Data revenue grew 13.5%, from R3,720-billion to R4,224-billion, while SMS and MMS revenue fell for the first time, although only marginally, by 0,2%, from R1,533-billion to R1,53-billion.

‚”The results confirm World Wide Worx findings in its Mobility 2012 research project, which showed that SMS spend was flattening while data was rising fast,‚” says World Wide Worx MD Arthur Goldstuck. ‚”We can expect voice to follow the same trend before long.‚”

The Mobility 2012 project was backed by First National Bank.

Vodacom also reported that revenue from the interconnect fee fell a dramatic 17,6%, to R2,471-billion in the six months to the end of September 2012, compared to the same period a year before. This proved that the cuts in the interconnect fee mandated by the regulator, Icasa, were having an impact on mobile network operators’ revenues, said Goldstuck.

Vodacom’s South African active customer base increased by 21,9% over the same period last year, to 30,783-million. Of these, 24,031-million are pre-paid and 5,752-million are contract customers. Churn among pre-paid customers remains high, at 48,4%, while contract churn is at 9,2%.

In a formal statement released by Vodacom today, Shameel Joosub, Vodacom Group CEO commented:

‚”This was a great set of results with improvements in the traditional voice business and strong performances in the data and International segments lifting overall revenue growth.

‚”We also controlled costs well, with the end result that despite aggressive competition and an inflationary cost environment, we actually managed to increase margins.

‚”Thanks to our proactive added value approach, particularly the use of voice and data promotions, traffic growth in South Africa more than offset the impact of lower prices. Our strategy of driving smartphone penetration and data usage is working well, with the number of active smartphones in South Africa growing 36% and the average amount of data used by each of those handsets up 46%. Across the Group, only 35% of our active customer base is using data so we’re still very much at the beginning of this growth trend.

‚”The International operations performed extremely well with strong commercial propositions and the benefits of scale resulting in significantly higher margins.

‚”Very importantly, underpinning the growth in all areas of the business was an increase in investment. Network leadership is a crucial part of Vodacom’s strategy and a key differentiator. We increased the number of 3G base stations in the Group by more than 22% and thanks to the foundations laid over the past few years we were the first to launch LTE services in South Africa.‚”

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