Investor Relations

Key highlights

• Robust South African performance
• Service revenue up 4.4% (8.2% excluding the MTR impact)
• 15.7% increase in the contract customer base
• Prepaid customer growth impacted by a change in the disconnection policy and RICA^[1]
• Excellent progress in mobile broadband
• 43.2% growth in Group data revenue to R1 350 million (33.9% excluding rule change²)
• 54.5% increase in South African data traffic
• Continued investment in mobile broadband and fibre networks
• International operations slowly recovering
• Almost one million net customer additions
• Revenue in constant currency stable on prior year

Pieter Uys, Chief Executive Officer, commented:
“This was a positive start to our financial year with overall Group service revenue increasing 3.1% in constant currency. Our continued focus on broadband leadership paid off with Group data revenue growing 43.2%.

Excluding the impact of mobile termination rates (‘MTRs’), South Africa’s service revenue growth of 8.2% reflected robust growth in data revenue and gains on the voice side. Lower MTRs had a negative impact of approximately R393 million on revenue in the quarter. We pressed ahead with actions to deliver greater value to customers launching prepaid promotions and reducing data and voice contract tariffs.

We are pleased to see that the actions we have taken in our key international markets are slowly paying off. We added almost one million customers in the quarter and revenue in constant currency was stable year on year.”

Group
Group revenue and service revenue for the three months ended 30 June 2010 increased in constant currency by 3.0% and 3.1% respectively, with continued robust performance in South Africa and a 43.2% growth in Group data revenue. The South African rand strengthened against all the other functional currencies in the international operations, resulting in lower reported Group revenue growth of 0.7% and service revenue growth of 0.6%. The South African mobile operations contributed 87.2% (March 2010: 87.4%) of Group revenue.

Group customers increased 1.1 million in the quarter, excluding the reduction of 3.3 million call-forward SIMs in South Africa on 1 April 2010, as discussed below, resulting in total Group mobile customers of 37.7 million at 30 June 2010. The South African mobile operations contributed 61.4% (March 2010: 65.8%) of Group total mobile customers at 30 June 2010.

South Africa
The South African operations posted solid revenue growth of 3.8% to R12 567 million, despite the 18.3% decline in interconnect revenue. Service revenue growth of 8.2% (excluding the impact of MTRs) was supported by the increasing contribution from data revenue which now comprises 11.9% of service revenue. Data revenue increased 43.2% to R1 307 million due to data traffic growth of 54.5%, which was driven by more than 50% growth in smartphones, lower device and usage prices and improved coverage through continued investment in 3G and fibre networks. Data revenue growth was impacted by the change in the data carry-over rule in the prior year, excluding this impact data revenue growth was 33.8%.

The South African customer base declined by 3.1 million to 23.2 million in the quarter mainly due to the change in the disconnection policy of 13 months to seven months for call-forward SIMs. Excluding the impact of the disconnection policy, prepaid customers declined by 11.9% year on year due to RICA. Prepaid ARPU increased 19.7% to R79 largely as a result of the lower customer base.

Contract customer growth remained strong, up 15.7% to 4.7 million customers, now representing 20.2% of the South African customer base (March 2010: 17.1%). Contract ARPU declined 7.4% to R411 due to the strong growth of lower-end contract packages and reduced out-of-bundle spend.

During the quarter, various new value offerings were introduced such as free contract bundle minutes and lower prepaid tariff plans, resulting in an increase in outgoing traffic of 4.6% (excluding Night shift and Extra time free minutes).

International
The international operations recorded strong customer growth of 15.8% year on year to 14.6 million, adding almost one million customers in the quarter mainly from Tanzania where the market has responded well to the newly introduced tariff plans.

Revenue in the international mobile operations in constant currency declined by 0.4%. Including the effect of foreign exchange movements, revenue declined 14.5% to R1 922 million. The international segment revenue has been restated to include Gateway of R709 million (US$94 million) in the quarter.

The quarterly information has not been audited or reviewed by Vodacom's external auditors.

Detailed announcement (PDF-68kb)