Vodacom’s R 2-Billion 3G/HSDPA investment grows further
Cell C’s CEO Jeffrey Hedberg recently said that his company does not see a good business case for investing in a 3G/HSDPA network and that he thinks it will be difficult for a cellular provider to show a return on its mobile broadband investment.
Vodacom – which has so far invested over R 2-Billion into its 3G/HSDPA network – is more upbeat about the prospects of mobile broadband in South Africa. Vodacom pointed out that the R 2-Billion is only its capital expenditure (CAPEX) and does not include any operational costs (OPEX).
Vodacom has in excess of 2000 3G/HSDPA base stations which cover most major towns and cities countrywide. The company continues to invest in its broadband network and is expanding its 3G/HSDPA service to various major metropolitan and many rural areas throughout South Africa.
The continued investment in its mobile broadband network started rumors that the company is incurring significant losses on its high speed data products. Vodacom is however unfazed, saying that as the leading cellular network it has to accelerate the development of data services in South Africa.
Vodacom’s HSDPA data prices are currently very competitive when compared to the rest of the world and around half the price of services in developed countries like Australia and the UK. Unfortunately local mobile broadband rates are often compared to fixed line services overseas which creates the impression that local wireless broadband prices are high.
Long term vision
Vodacom said that its investment in a broadband data service was not made for short term returns.
“As the leading cellular network, Vodacom has to accelerate the development of data services. Vodacom believes that through its global competitiveness in the data market, a substantial improvement in broadband penetration will be achieved,” Vodacom said.
“The advantages of mobile broadband data services have been undeniable and to many people it has become an indispensable tool,” Vodacom said. It currently has around 200 000 3G/HSDPA subscribers, representing about a third of all broadband connections in South Africa.
Vodacom has also expanded its broadband product basket to include iBurst, and has indicated that they plan to launch ADSL and WiMax services before the end of the year.
This strategy may not appeal to all investors and analysts, but Vodacom’s strong focus on broadband and their investment in starting their own ISP – Vodacom Converged Solutions – will most likely prove to be a profitable long term vision.
Across the world, data revenues are increasing while traditional revenue streams from voice minutes are decreasing. As of 31 March 2007, data revenue constituted 9.2% of total revenue for the Vodacom Group, up from 6.8% in 2006.
“The data revenue in all countries increased substantially, confirming the trend of an increased uptake of data services by customers,” Vodacom pointed out.
Apart from the direct data revenue generated through increased broadband uptake, it also opens up new potential revenue streams by providing services to consumers over their broadband connections. Many international players are already significantly increasing the average revenue per user (ARPU) through bolt-on offerings like IPTV and video on demand.
So while some mobile operators, like Cell C, are focusing firmly on growing their voice revenue in the lower LSM 3-7 income groups, Vodacom’s choice to also invest heavily in high-end services will most likely be handsomely rewarded in future.
Loading ...