JSE-listed Vodacom plans to “massively” upscale its investment programme over the next three years, while it accelerates growth, diversifies revenue growth and unlocks new opportunities.

Vodacom group CEO Shameel Joosub said on Monday that the telecommunications group would increase its capital investment by about 20% to R13-billion in the new financial year and between 14% and 17% of group revenue over the next three years.

The group’s South African operations would attract 70% of the investment injection as Vodacom tackled growing competition.

“The focus during this year [the financial year to March 2014] has been on developing new products and strategies with the overall objective of broadening our appeal by reducing the cost to communicate,” he said at the company’s year-end results presentation in Midrand.

He noted that the increased capacity enabled Vodacom to offset lower prices with higher volumes and improved quality.

Further, the company planned to shift from the single-service business established 20 years ago to a comprehensive communications group, incorporating digital services, such as voucher cloud, the integration of its fixed business with the newly acquired Neotel, cloud services, fibre-to-the-X and machine-to-machine acceleration, as well as online self-help initiatives, mobile financial services, which would see Vodacom relaunch M-Pesa in South Africa in the next two months, and digital subscriber line-like services, besides others.

Vodacom also aimed to close the gap in its third-generation (3G) services, ensuring 100% penetration by rolling out 3G sites to all the areas the company’s voice services covered.

South Africa’s largest mobile operator believed that the implementation of the product and investment strategy over the past year, coupled with strong growth in data, had reversed the South African operation’s declining service revenue growth, which had lagged owing to lower mobile termination rates (MTRs) and aggressive competition.

During the year to March 2014, the group increased its capital investments 14% to R10.8-billion, accounting for 14.2% of revenue, supporting a 27% increase in outgoing voice traffic and an over 94% increase in data use.

In South Africa, R6.9-billion had been invested to expand the reach of Vodacom’s data network and increase the network’s capacity and resilience by adding 1 081 new 3G sites to support data growth and 598 second-generation (2G) sites to improve voice capacity. The company also increased the number of long-term evolution sites to 916 and connected 73.6% of all sites to self-provided high-speed transmission.

Internationally, capital investment increased by 36.8% to R3.9-billion, or 27.3% of revenue, to expand voice and data network coverage and capacity.

The number of 2G and 3G sites increased 25.5% and 53.4% respectively.

The latest accelerated investment plan would continue expanding the reach and quality of data and voice networks across the group, and facilitate the rolling out of an expanded suite of business services such as fibre-to-the-business.

But the programme would be dependent on the final outcome of the MTRs, the uncertainty of which led the group to maintain its medium-term guidance of low single-digit service-revenue growth and mid to high single-digit growth of earnings before interest, tax, depreciation and amortisation.

The Independent Communications Authority of South Africa (Icasa) gazetted final regulations on MTRs in South Africa, which had been deemed invalid and unlawful earlier in the year, but the High Court suspended its order for a period of six months from April to September 2014.

This meant that, since April 1, MTRs had been reduced from 40c to 20c a minute for calls from Cell C or Telkom Mobile to each network, including Vodacom and MTN, while the two dominant operators were hit with an MTR of 44c a minute for calls from their networks to others.

This constituted an asymmetry of 120%, Joosub pointed out.

“Icasa is required during this six-month period to select an appropriate methodology to undertake a full cost study to determine new MTRs in consultation with the industry,” he said.

The previous MTR glide path, which stipulated reduction to a 40c a minute rate by March 2013, with asymmetry of 10% above the set rate, had shaved off 21.7% to R3.8-billion of the South African operation’s service revenue during the period to March 2014 and 18.9% to R4.9-billion during the 12 months to March 2013, after ending the 2012 financial year with interconnect revenue of R6.06-billion.

The initial termination rate of R1.25 a minute in 2009 had been systemically reduced over the years, dropping to 89c and 73c in 2010 and 2011 respectively, finally reaching 56c by 2012.