Vodacom reports revenue growth as more South Africans work remotely during lockdown

Vodacom said in trading update for the quarter ending June 2020, that group service revenue climbed 7.6%, benefitting from strong customer demand in South Africa during lockdown.

Service revenue growth for South Africa increased by 6.4% for the quarter, supported by strong demand for data and connectivity services in the period.

By comparison, international operations were negatively impacted by lower economic activity from the effects of Covid-19.

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 said.

Vodacom said that its customer base in South Africa declined by 9%, driven by reduced connections in the prepaid segment due to the movement of South Africans being restricted.

Vodacom South Africa’s total customer base declined from 41.3 million to 39.4 million over the period. This was almost entirely attributable to a loss of 1.9 million prepaid subscribers.

The prepaid customer base declined by 11.9%, as gross additions during this period were weak due to store closures and restricted movements. The group said that some recovery was seen when South Africa moved to Level 3 lock down at the end of the quarter.

The average revenue per user (ARPU) increased by 20.8%, to R64.

The group said that data traffic increased by 97.7% for the quarter, as demand for connectivity services was key in keeping the economy going, and learners educated.

Despite price reductions of 34% on average from 1 April 2020 for 30-day data bundles, the increased demand more than offset these price reductions during the period, Vodacom said.

Vodacom also reported an increase in data customers of 6.5% during the period with 13.2 million using 4G, up 29.4%.

Financial services grew by 10.9% during the period supported by Airtime Advance, which increased by 11.9%, as more customers were able to use the service – penetrating 28.0% of Vodacom’s prepaid base.

Insurance policies increased by 22.8% to 1.9 million long and short term policies.

Reduced disposable income

In South Africa, the combination of increased demand for data following significant tariff reductions of up to 40% affected 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, said Shameel Joosub, Vodacom Group chief executive officer.

“As a result, we accelerated network infrastructure spend by R500 million to R2.7 billion in Q1 and used the temporary assignment of spectrum by ICASA to rapidly increase network capacity to ensure that we continue to deliver a high-quality experience to customers,” he said.

“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 warned that disposable income will increasingly come under pressure as a result of rising unemployment and reduced economic activity in South Africa.

Read: Rain and Huawei launch standalone 5G network

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