Vodacom survives user base deflation

VODACOM posted a robust financial performance this year - but saw subscriber growth hit hard by new legislation.

The Regulation of Interception of Communications and Provision of Communication-Related Information Act caused a severe slow-down in new monthly connections.

The rate of connections fell from well over a million net connections a month to under 300000 in August, with September only improving slightly. Its revenue rose by 9,9percent to R28,7billion for the six months to September this year and saw market share in South Africa increase to 55percent.

Group chief executive Pieter Uys said: "This has been a period of substantial development for Vodacom during which we achieved continued growth, with a robust performance from our South African operations in particular."

Vodacom executives, along with those from other operators, have recently made presentations to Parliament in relation to a possible reduction in interconnection fees following complaints of excessive telecommunications pricing.

Uys said a 10percent reduction in mobile termination rates would result in a R200million annual loss for the group, since it is a network receiver of interconnection fees.

Arthur Goldstuck, head of World Wide Worx, said the fall in prices would result in high usage and even higher average revenue per user, which would have a balancing effect on the lower termination rates.

Spiwe Chireka, a Frost & Sullivan ICT analyst, said: "The economic crisis has hit resource-intensive markets like DRC hard, and unfortunately the telecoms sector is not immune."

She explained that Vodacom DRC has been losing market share to Tigo, which has increased its market share by 13percent over the last two years at the expense of Vodacom and Zain DRC.

She said: "In Tanzania, competition has intensified significantly. Eleven mobile licences were issued by the end of 2008. Vodacom will be under continued pressure there, as a few of those operators are CDMA providers that will be able to undercut Vodacom's pricing."