Vodacom South Africa’s Revenue Hit By Pricing Transformation Strategy

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Vodacom CEO Shameel Joosub. YouTube
Vodacom CEO Shameel Joosub. YouTube

Vodacom South Africa has reported a 1.3% drop to R17.9 billion in the third quarter ended 31 December 2018 hit by the effects of our pricing transformation strategy.

Vodacom, which is owned by British mobile phone giant Vodafone, announced on Thursday that pricing transformation strategy was implemented to reduce the cost to communicate, as well as the transitioning of traffic between its roaming partners.

The company implemented a number of promotions in the quarter, including SummerGigs campaign, in addition to the introduction of lower-priced bundled offers during the course of 2018.

“These efforts have impacted data revenue growth, as it did not yield the expected elasticity given a tougher than anticipated consumer spending environment,” the company said on Thursday.

“However, our proactive efforts to keep customers in-bundle have reduced our future exposure to out of bundle revenues.”

On a positive note, Vodacom announced that its customers increased by 5.4% in the quarter and it gained 86 000 contract customers to 5.6 million, up 5.7% year-on-year, supported by gains in both the consumer and enterprise segments.

The company added that data revenue was flat on the prior year, as customers used data rewards from its Summer campaign to offset their usual spend.

It said utilisation remain encouragingly strong, with data traffic up 41.4%.

The company now has 20.2 million active smart devices on its network, reflecting a 13.3% rise with average gigabytes per smart device increasing by 31.9% to 1.1GB.

Its 4G customers have increased by 40.5% to 9.2 million.

“We sold 209 million data bundles this quarter, as we continue to migrate customers to more in-bundle usage. We are managing out-of-bundle spend, with more inclusive value contracts and affordable data bundles with shorter validity periods, both of which are increasing in popularity with customers,” the company said.

“The long-term benefit from this pricing transformation, is expected to offset the short-term growth impacts as customers migrate to offers with lower effective rates, despite lower elasticity currently being experienced in the market.”

Despite a poor performance by its South African operations, Vodacom Group reported a growth in revenue and service revenue at a group level increased by 1.5% and 2.4% respectively.

Excluding Safaricom, Vodacom Group added 198 000 customers in the three-month period and now serve 79 million across the group, having added a healthy 5.2 million customers to the Vodacom network in the past year.

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