{"id":459667,"date":"2022-09-07T15:02:37","date_gmt":"2022-09-07T13:02:37","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=459667"},"modified":"2022-09-07T15:05:24","modified_gmt":"2022-09-07T13:05:24","slug":"vodacom-and-mtns-multi-billion-rand-network-battle","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/cellular\/459667-vodacom-and-mtns-multi-billion-rand-network-battle.html","title":{"rendered":"Vodacom and MTN’s multi-billion rand network battle"},"content":{"rendered":"

Vodacom and MTN have invested R50 billion each in their mobile networks over the last five years, but their capital intensity reveals very different investment strategies.<\/p>\n

Capital expenditure (Capex), also known as network investments, is a sensitive topic, and big adjustments in expenditure can scare investors.<\/p>\n

For example, when former Telkom CEO Papi Molotsane announced a plan to scale up Capex in 2006 to make the company more competitive, the share price plummeted by 7%.<\/p>\n

However, the inverse can have even more devastating effects. Unless a telecommunications operator invests in its network, it will become uncompetitive and die.<\/p>\n

The reality is that telecommunications is a capital-intensive field where continual network investments are needed to remain competitive.<\/p>\n

Vodacom and MTN\u2019s South African Capex over the last few years shows just how expensive it is to remain competitive.<\/p>\n

Vodacom increased its capital expenditure from R8.9 billion in the 2017\/2018 financial year to R11.1 billion in the 2021\/2022 financial year.<\/p>\n

The increased network investment is needed to keep in touch with MTN, which has built up a substantial lead over Vodacom in data network quality.<\/p>\n

MTN was forced to react. After reducing Capex to R7.5 billion in 2020, MTN South Africa increased it to over R10 billion in 2021.<\/p>\n

Telkom and Cell C, in comparison, cannot match South Africa\u2019s top players in network investments, as shown in the chart below (courtesy of Analytico<\/a><\/strong>).<\/p>\n

\"\"<\/a>

Capital expenditure from Vodacom, MTN, Telkom, and Cell C between 2018 and 2022<\/p><\/div>\n

Capital intensity<\/strong><\/h3>\n

While tracking the Capex of a telecommunications operator is instructive, capital intensity is of even more value to investors.<\/p>\n

Capital intensity is capital expenditure as a percentage of revenue. It tells you what percentage of income an operator spends on their network.<\/p>\n

MTN, which generates less revenue in South Africa than Vodacom, has a much higher capital intensity.<\/p>\n

Over the last financial year, Vodacom invested R11 billion in its network, which was approximately 14% of its revenue. MTN, in comparison, used 21% of its revenue to invest R10 billion in its network.<\/p>\n

Vodacom\u2019s strategy is to keep its capital intensity stable to give investors certainty and ensure good earnings.<\/p>\n

Over the past five years, Vodacom\u2019s capital intensity in South Africa was always between 13% and 14%.<\/p>\n

MTN, in comparison, has a more flexible capital intensity strategy. Over the last five years, its capital intensity fluctuated between 17% and 25%.<\/p>\n

The charts below,\u00a0courtesy of Analytico<\/a><\/strong>, show Vodacom and MTN\u2019s capital intensity between 2018 and 2022.<\/p>\n

\"\"<\/a><\/p>\n

\n

This article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n

Now read:\u00a0MTN crushes Vodacom and Telkom in customer satisfaction<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"

Unless a telecommunications operator invests in its network, it will become uncompetitive and die.<\/p>\n","protected":false},"author":341108,"featured_media":434770,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[14,80335],"tags":[45084,355,35,42,12731,109,41],"class_list":["post-459667","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cellular","category-investing","tag-capital-expenditure","tag-cell-c","tag-headline","tag-mtn","tag-papi-molotsane","tag-telkom","tag-vodacom"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/459667"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341108"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=459667"}],"version-history":[{"count":1,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/459667\/revisions"}],"predecessor-version":[{"id":459673,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/459667\/revisions\/459673"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/434770"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=459667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=459667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=459667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}