Vodacom sheds over 840,000 customers in South Africa

Mobile operator Vodacom has cleaned up its customer base, shedding over 1 million non-revenue-generating customers on its records.

In a trading update for the third quarter ending December 2022, the group reported a net loss of 844,000 local customers in South Africa through the exercise, with its base shrinking by 2.4% to 44.6 million customers in the country.

Despite losing customers over the quarter, revenue was up 5.0% to R21.9 billion, supported by equipment sales, while service revenue was up 3% to R15.4 billion, driven by new ways to keep customers engaged.

South Africa still accounts for the bulk of group and group service revenue, which totalled R30.7 billion and R24 billion for the quarter, respectively – up 4.7% and 3.5% on a normalised basis.

“Our investment into network resilience and capacity complemented higher customer engagement levels associated with a successful summer campaign and our customer value management powered personalised offers,” the group said.

“Through our innovative summer campaign, customers were rewarded with Vodabucks by completing personalised goals such as recharging, buying bundles or paying their bills, keeping our customers engaged on our network while rewarding them for their loyalty.”

New services such as financial and digital services, fixed and IoT were up 9.9% and contributed R2.3 billion, or 15.0% of South Africa’s service revenue.

Mobile contract customer revenue increased by 3.1% to R5.7 billion, supported by improved growth in the consumer segment. Growth in the consumer segment saw strong demand for data services and the contract price increases of between 3% – 5% implemented in the first quarter of the financial year, Vodacom said.

Mobile contract ARPU of R299 was flat, with the price increases offset by repricing pressure associated with the government contract for mobile services within Vodacom Business.

“We added 132,000 contract customers in the quarter, with a base of 6.7 million, up 4.6%. Our prepaid segment delivered a good result, given the challenging macro backdrop associated with higher inflation and power availability

Data traffic growth accelerated to 39.3% in the quarter, with data customers of 25.5 million up 9.0%, representing 70.6% penetration of the group’s one-month active customer base.

Smart devices on Vodacom’s network was up by 13.0% to 29.5 million, while the average usage per smart device increased 27.4% to 3.2GB per month.

“The number of 4G devices on our network increased 11.4% to 19.2 million. Prepaid data revenue of R3.0 billion was up 14.0%,” it said.

Vodacom continues to report strong growth in its financial services segments, with service revenue from financial services was up 12.6% to R779 million, with the customer base reaching 14.7 million.

“Revenue growth was supported by our insurance portfolio, with the number of policies up 11.1% to 2.6 million. Our Airtime Advance product remained a key contributor to financial services revenue, and posted a pleasing acceleration in the third quarter,” it said.

The group also highlighted the continued growth of its “super-app”, VodaPay, which has seen more than 4.5 million downloads, 2.7 million registered users and over 100 mini-apps.

“We continue to expand our offerings as we drive deeper penetration of financial services and are on track to scale VodaPay cash-in/cash-out in the next financial year,” it said.

While the consumer segment is performing well, Vodacom Business struggled.

Vodacom Business service revenue declined by 3.5% to R4.3 billion, impacted by a decline in wholesale revenue as the group lapped a strong prior year comparative period as well as the repricing pressures associated with government contracts.

IoT connections were up 15.4% to 7.1 million, with one-off project revenue supporting the comparative period.

Fixed service revenue was up 10.7%, excluding wholesale transit. This was supported by strong customer adoption of fibre, with homes and businesses connected reaching 155 760, while the group’s fibre passed 163,910 homes and businesses.

The group’s proposed acquisition of an up to 40% joint venture stake in Maziv (formerly FibreCo) is still pending Competition Commission approval.

Through the acquisition, the group aims to gain exposure to highly attractive and fast-growing businesses and South Africa’s largest open-access fibre players, including Vumatel and Dark Fibre Africa.

“We invested R2.7 billion in the quarter to expand network capacity to manage the growing demand for data, modernise our network and enhance our IT platforms to support the build-out of best-in-class networks and platforms as we leverage our newly acquired spectrum assets in South Africa.”