Out-of-bundle data price cuts hurting Vodacom in South Africa

Vodacom has released a trading update for the quarter ended 30 June 2019, outlining its financial performance over the period.

The company’s group revenue grew by 1.9% to R21.5 billion, with service revenue increasing by 3.9% to R17.4 billion compared to the same period last year.

Vodacom said it added 608,000 customers in South Africa in the quarter, with 522,000 of those being prepaid customers. The company’s local contract customer base grew by 8.9%.

Vodacom CEO Shameel Joosub said that good growth from the operator’s international portfolio was offset by slower performance in South Africa, which the company had anticipated as a result of ICASA’s new data regulations.

The regulations prompted mobile networks to reduce out-of-bundle (OOB) data prices and automatically block OOB usage, with customers having the option to opt-in to OOB billing.

Regulations and spectrum

“In South Africa, service revenue was negatively impacted by the further substantial reduction in out-of-bundle tariffs announced in March as part of our sustained pricing transformation strategy to bring down the prices of our data services,” Joosub said.

“The impact from three months of ICASA’s data usage regulations, the transition between national roaming partners and the tough retail operating environment, were other contributors to the 1.2% decline in service revenue in South Africa.”

Growth in data usage remained strong locally, with data traffic increasing by 52% compared to the same period last year.

Joosub added that Vodacom is encouraged by President Cyril Ramaphosa’s commitment to hasten the allocation of spectrum to mobile operators.

“This is a vital part of reducing input costs and further bringing down data prices in South Africa, where lengthy delays in completing the digital migration and allocating 4G spectrum has curbed the pace at which data prices could have fallen,” he said.

“Clear policy direction for the country’s telecommunications industry is also expected to restore investor confidence in South Africa and boost economic growth.”

Now read: Vodacom data prices could be cut in half – Or they could get even more expensive

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Out-of-bundle data price cuts hurting Vodacom in South Africa