Performance

Financial performance

Vodacom SA lifted revenue 10.8% to R47 483 million in the year ended 31 March 2009, up from R42 852 million in the prior year. This was primarily due to the 11.3% increase in customers to 27.6 million and strong growth in data revenue of 27.9% to R5 973 million. Data revenue from connectivity and usage (excluding messaging revenue) increased by 69.3% as a result of the 80.0% increase in broadband customers. Data revenue accounted for 14.1% of South African revenue (excluding equipment sales).

EBITDA was up 9.7% to R16 222 million with a slight decline in the EBITDA margin from 34.5% to 34.2%. Excluding the BBBEE transaction expenses of R95 million, EBITDA growth was 10.3%.

Operating profit of R11 372 million included a non-tax deductible share-based BBBEE charge of R1 382 million. Excluding this charge, operating profit was up 8.4% to R12 754 million. The lower growth in adjusted operating profit as compared to EBITDA is largely due to the 34.9% increase in the amortisation of intangible assets to R607 million.

South African capital expenditure at R4 627 million representing 9.7% of revenue, was largely as a result of continued investment in the data network and transmission self provisioning, to support substantial growth in data volumes coupled with improving coverage and quality.

Operational performance

Mobile voice

In South Africa, SIM card penetration is now estimated to be at 108% of the population. Prepaid customers continue to dominate the market, comprising an estimated 85.3% of all mobile customers. The 11.3% increase in our customer base to 27.6 million comprised prepaid customer growth of 11.3% to 23.6 million and contract customer growth of 11.4% to 3.9 million. This was a direct result of the 8.5% increase in gross connections to 13.1 million driven by the success of our dynamically priced prepaid product, Yebo4Less, which had attracted 4.8 million customers (or 20.4% of the prepaid customer base) as at 31 March 2009, as well as the March Madness campaign. Net additions increased to 2.8 million from 1.8 million in the prior year.

Overall churn reduced by 2.2 percentage points to 40.1%, largely as a result of targeted programmes to reduce churn in the prepaid customer base, which eased to 45.4% from 47.9% in the prior year. Focused campaigns to offer greater value to customers, marketing SIM swaps and our various loyalty programmes are proving to be highly effective and Vodacom has the lowest prepaid churn in the local market. We also contained contract churn to 9.9%, slightly up from 8.3% as a result of an increase in involuntary churn driven by the economic conditions. In tandem with our focus on reducing churn, our strong credit management capability assisted us to manage increasing levels of bad debt due to the economic pressure being felt by our customers.

Total traffic increased 7.1% to 24.4 billion minutes, mainly due to the growth in the customer base. Contract minutes of use, which excludes bundled minutes, showed a 9.3% decline to 156 minutes per customer per month, as a result of fewer contract customers spending outside of their bundles. Prepaid minutes increased 4.3% to 48 minutes per customer per month.

During the period, total ARPU increased 3.9% to R133 per month. Prepaid customer ARPU rose 9.7% to R68 per month primarily due to the introduction of Yebo4Less and lower denominated vouchers. Contract customer ARPU declined 2.5% to R474 per month, with the main contributors to the decrease being the rapid growth in low-end hybrid contract customers and customers not exceeding their bundles. Community services ARPU fell 22.5% to R534 per month due to intensified competition.

Messaging and data

We continued to see strong growth in our messaging and data products. During the year under review, usage of GPRS, 3G and HSPDA increased, with data volumes climbing 97.8% to 3.2 terabytes in the year, and the number of packet switched data users reaching 4.9 million at 31 March 2009. We transmitted 5.4 billion messages (MMS/SMS) over our network in the year, up 8.2%. Broadband customers grew 80.0% to 720 000 customers (including customers on 24-month contracts and those electing recurring data bundles) from 400 000 in the prior period.

Our introduction of Mobile Internet in June 2008 substantially increased the number of customers accessing the internet via their mobile phones by enhancing the customer experience and reducing the cost of accessing the internet. Vodacom had five million unique data users, 962 000 active email accounts and 2.6 million unique Vodafone live! users by year end, all significant contributors to data traffic.

During the year, we secured our position as the leading provider of broadband connectivity in the country, with the most extensive 3G network comprising more than 2 880 sites. We continued to launch targeted campaigns and more affordable options to drive broadband connectivity and mobile internet throughout the year. The number of active 3G/HSDPA handsets on the network as at 31 March 2009 was 2.8 million, compared to 1.3 million a year before. In February 2009, we launched Vodafone Connect Via the Phone which enables customers to use a 3G phone as a modem to access the internet from their PCs or laptops.

Converged ICT Services

We continued to make strong progress in our converged service offerings to consumers including online services, media and advertising, financial services and social networking.

Vodacom Mobile Media, responsible for mobile advertising, generated strong advertising revenue from display advertising on the Vodafone live! portal and Please Call Me messaging service. During the year we also launched a made-for-mobile advertising funded mobi-soap video series with all content free to Vodacom customers.

In its first year of operation, Vodacom Business reached some significant milestones in product development and sales. The business has developed a comprehensive portfolio of 28 products and acquired several contracts to provide access and managed hosting services as well as total converged communication services. Vodacom Business is currently working on a number of large tenders to supply converged solutions. Vodacom Business has invested significantly in infrastructure with a Tier 1 internet network capability, as well as a corporate-grade national MPLS VPN. Its offerings are supported by our new data centre in Midrand, the development of soft switch capability and a client services operations centre.