Vodacom boosts capital expenditure by 12% as spectrum auction nears

SOUTH AFRICA – Mobile communications company Vodacom has boosted investment in its network by 12.3% year on year in the quarter ended 31 December 2020, bringing capital expenditure to US$180.4 million from US$160.4 million in the same quarter a year ago.

The network investment came on the back of an 8.5% uplift in revenue to US$1.3 billion, with service revenue climbing by 5.4% to US$955.5 million, parent Vodacom Group disclosed in an announcement to shareholders.

The increased capital investment was designed to improve capacity to “improve the customer experience”, Vodacom said.

Some of the money was used to take advantage of “emergency” spectrum allocated on a temporary basis by communications regulator Independent Communications Authority of South Africa (ICASA) last year to deal with anticipated network demand as people were forced to work from home due to the Covid-19 lockdown.

Vodacom said the upcoming spectrum auction – scheduled for late March this year, will be crucial in extending coverage, improving quality of service, and lowering the cost to communicate.

However, the auction still be derailed as both Telkom (supported by e.tv) and MTN South Africa are challenging aspects of ICASA’s invitation to apply for the spectrum.

In the latest quarter, Vodacom reported service revenue of US$955.5 million, supported by a “successful summer campaign that promoted our connectivity, financial and digital services”.

“We had 23 million customers opt into the campaign, which was underpinned by our newly launched loyalty programme, VodaBucks. The loyalty programme rewards customers for achieving their behavioural goals, recharging, buying bundles or paying their bills. Our summer campaign recorded 271 million device ‘shakes’, or five million shakes per day, and stimulated strong customer engagement via instant rewards,” the statement read.

“Vodacom Group reported a 6.7% year-on-year improvement in normalised group revenue to US$1.7 billion for the quarter”

Revenue growth of 8.5% in the quarter was ahead of service revenue growth and was supported by equipment and non-service revenue, Vodacom said.

Mobile contract customer revenue increased by 1.6% to US$347.5illion, which it described as a resilient performance given the poor state of the economy.

In the prepaid segment, mobile customer revenue increased by 9.4%.

Prepaid net additions were strong at 1.4 million with average revenue per user in this segment increasing by 9.3% to US$3.9, supported by increased usage of connectivity and digital services and the accessibility of airtime via the Airtime Advance product.

In the quarter, Airtime Advanced amounted to 40.2% of total prepaid recharges.

Data traffic increased by 43.2% in the quarter with data customer net additions being 0.2 million, to total 22.5 million, while smart devices on the network were up by 4.5% to 23.5 million.

The number of 4G devices jumped by 24% to 15.1 million while the average usage per smart device increased by 34.9% to 2.1GB per month.

Revenue generated from financial services was up by 24.3% to US$41.4 million in the quarter, while customers increased by 23.8% to 13.1 million.

Revenue growth was underpinned by the Airtime Advance product, where Vodacom advanced US$207 million in airtime, an increase of 27.7%.

The number of Airtime Advance customers increased by 26.5% to 10.7 million.

In the insurance space, policies increased by 11.2% to two million. “In partnership with Alipay, we continue to develop our single lifestyle app, VodaPay, which will further promote financial inclusion for our consumers and merchants,” Vodacom said.

Vodacom South Africa’s fibre customer base more than doubled year-on-year to 110,000 homes and businesses connected, although this includes premises where Vodacom acts as an Internet service provider on other fibre network operators’ infrastructure.

The company’s owned fibre roll-out passed 139,000 homes and businesses at the end of 2020, up 39.8% year on year.

Vodacom Group, meanwhile, reported a 6.7% year-on-year improvement in normalised group revenue to US$1.7 billion for the quarter.

Service revenue, also normalised, rose by 4.2% to US$1.3 billion.

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