Vodacom wins with broadband

Six months after rebranding, Vodacom released a solid set of financial results this morning. Interim results for the six months ended, 30 September 2011, showed total group revenue rising to R31.7 billion from R29.5 billion. Mobile data revenue was 31.1% up and EBITDA 7.6% higher to R10.5 billion on the back of a 38% growth in data customers. Headline earnings per share grew 6.9% year on year to 324 cents.

Vodacom declared an interim dividend of 260 cents per share, with shareholders to receive a R3.9 billion payout.

Vodacom South Africa cut data prices by up to 42%, as competition intensified. This followed moves by industry rivals, Cell C and MTN, who cut their data prices to obtain a foothold in the market.

“Vodacom is clearly intent on protecting its position as the leading provider of mobile services in South Africa in what is shaping up to be an important strategic battle between mobile service providers”, says Frost & Sullivan’s ICT research analyst Lehlohonolo Mokenela. “The price wars are, however, likely to put a squeeze on margins until some form of normalisation is established. It is also an indication of the contribution operators expect data to have on future revenue.”

Despite a higher year on year churn, the subscriber base for the group rose to 48 million, with active data subscribers up by 38%. A total of 2.4 million subscribers were added in South Africa, while international operations grew by 2 million subscribers.

Vodacom directed R3.5 billion, up 83.4%, towards capital expenditure (CAPEX), as it is currently in the bidding process to upgrade its network. The group is looking to add new 3G base stations, and upgrade its existing base stations, in order to increase coverage and connection speed for the South African operations. Mokenela expects the ongoing network improvement, coupled with a strong brand, to see a continuation in the growth of Vodacom’s data revenue.

That said, clouds still loom over Vodacom operations in the DRC, following a dispute with its joint venture partner, Congolese Wireless Network (CWN). Vodacom investors should hope to avoid a long drawn out legal battle, so that the company can maintain its full focus on growing its business.

ARPU was down 9%, and it may take a further hit in the next quarter, following problems with the Blackberry SmartPhones in October. But market share is expected to remain largely unaffected as the problem also impacted Vodacom’s main rivals.

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Vodacom wins with broadband