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May 19, 2009

Vodacom to increase broadband roll-out in Africa

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Vodacom CEO Pieter Uys discusses its outlook for the months ahead.
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The last quarter of the 2009 financial year was a good indication of what JSE-listed telecommunications group Vodacom could expect going forward CEO Pieter Uys said on Tuesday.

Uys explained during a results presentation in Johannesburg that Vodacom South Africa’s subscriber numbers had increased by 1,2-million during the quarter ended March 31, 2009, almost one-half of the 2,8-million new subscribers it had added for the full financial year.

Further, the prepaid churn from the South African businesses had also improved in the quarter, he added, saying that this was a positive signal where the business was going.

In addition, while trading conditions in the international business remained challenging, conditions had not worsened, said Uys, adding that conditions for the international businesses could only improve from here on in.

The group had achieved a “good set of results”, given the economic slowdown, with good growth achieved in all measures, he commented.

Vodacom South Africa’s revenues had grown by 10,8%, despite a slowdown in the number of contract customers, given the economic downturn. However, the number of prepaid customers had increased.

The group noted that more affordable products were also driving usage by contract and prepaid customers, with outgoing traffic having increased by 8,2% in the year.

The total average revenue per user (Arpu) had increased by 3,9% to R133, while prepaid Arpu had increased by 9,7% to R68. Contract Arpu had declined by 2,5%, as customers were more cautious about phoning outside their bundles.

DATA GROWTH

Meanwhile, the group had achieved 97,8% growth in data traffic during the year, while data revenues were up 27,9%.

Data revenue from connectivity and usage had increased by 69,3%, mainly as a result of an 80% increase in broadband customers to over 720 000.

The group planned to further roll out and increase its broadband and mobile Internet usage in Africa.

Growth consultancy firm Frost & Sullivan information and communication technology analyst Lindsey McDonald highlighted that the growth in data traffic and broadband customers was where future revenue growth could be generated.

“This growth is significant, but at the same time, it’s coming off a relatively small base. We still haven’t seen the ramp-up in broadband services from fixed-line operators that we would like, so Vodacom’s coverage is perceived to be the most comprehensive and reliable. That’s why it has become a leader,” she said in a statement.

She added that Vodacom South Africa has also been able to offer a greater range of top-end products, such as Blackberry and smart phones, than its competitors, which had given it a “distinct advantage” in this segment of the market.

INTERNATIONAL OPERATIONS

Meanwhile, the group’s international business, comprising operations in the Democratic Republic of Congo (DRC), Mozambique, Lesotho and Tanzania, had achieved a 29,9% increase in revenues and a 30,7% growth in customer base.

Margins for all the international operations, except for the DRC, had improved in the year, the group reported.

The DRC operation had experienced a severe slump as the global economic slowdown impacted on the resource-driven economy.

Arpu in both the DRC and Tanzania had declined, but Mozambique’s Arpu had increased by 9%. Vodacom had introduced a number of more affordable products in these markets to increase usage.

The group had also increased its network coverage in Tanzania and Mozambique, while also making investments in data networks in Tanzania and Lesotho.

Vodacom was confident that its acquisition of African network and satellite services firm Gateway at the end of 2008, would increase its customer reach and network in Africa.

The acquisition was made to reposition the group as a provider of converged communication services and not only a mobile phone operator on the continent.

Uys noted that the group was in the process of integrating the Gateway business into the group.

McDonald noted that the Gateway acquisition was important for the group as it provided an instrument to provide services into Africa.

“But finding new targets will be tough. MTN and Zain are likely to have already considered good targets and there might not be much left for Vodacom,” she added.

Further, she noted that Vodacom would have to ensure that it provided something particularly suited to the needs of the continent and not merely what Vodafone offered, just under a different name.

Meanwhile, the group planned to invest a further R8-billion in capital expenditure in the 2010 financial year to ensure its continued growth in sub-Saharan Africa, but said that it would be cautious when spending the money, given the economic conditions.

Edited by: Mariaan Webb
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