Vodacom Group CEO Pieter Uys

In spite of a solid performance in mobile data, SA’s largest telecommunications operator, Vodacom, has reported flat group revenue growth of 3% in the first quarter of its 2011 financial year.

The company released its trading statement for the three months ended 30 June 2010 on Thursday, saying that although international markets are stabilising, weaker African currencies and a strong rand hampered growth.

Vodacom’s international operations recorded customer growth of 15,8% to 14,6m subscribers, adding over 1m subscribers during the first quarter. Vodacom Group CEO Pieter Uys says the increase came primarily from the Tanzanian market.

However, the stronger rand knocked international revenues down to R1,9bn, a decrease of 14,5%.

Competitor MTN has felt by the same currency headwinds in its international operations.

Subsidiary Gateway, for which Vodacom grossly overpaid two years ago, contributed R709m to international revenue. The group traditionally reported Gateway as a separate entity but is now stating its growth within the international report.

In the important SA market, Vodacom’s results were hit hard by the recent reduction in mobile termination rates — the fees Vodacom charges other operators to carry calls onto its network. The reduction knocked the company’s SA service revenue down by R400m, leaving it with revenue growth of 4,4% — it would have been 8,2% if the rates had not been cut.

Following political pressure, operators cut mobile termination rates in March from R1,25/minute to 89c/minute during peak times. However, industry regulator, the Independent Communications Authority of SA, wants the rates cut much further over the next 24 months. Icasa wants mobile termination rates reduced to 40c/minute by mid-2012.

Mobile operators have all felt pain from the initial cut and are fighting to have a second reduction, proposed for this month, moved out to next year.

“All we want is a less steep glide path for termination rates. It is the only thing we don’t agree with,” says Uys. “If they work out as we have proposed to the authority, there will be a six-month gap between the announcement of the regulations and the actual rate cut.”

Uys says the industry is not getting credit for the voluntary cut made in March.

Meanwhile, Vodacom’s focus on data is paying off, with the quarterly results showing a solid year-on-year increase in data revenue of 43,2%, to R1,3bn. Uys says data revenue now accounts for 12% of total service revenue in SA, including the income it receives from messaging.

The SA business has been investing significantly in its 3G network and installed 230 new base stations during the quarter.  — Candice Jones, TechCentral

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