Chairman’s statement

	This is a time for review and renewal. As a publicly listed entity, and a subsidiary of a leading multinational group, Vodacom’s corporate culture of being a high-profile and visible company sets a strong foundation for its commitment to the highest standards of integrity, accountability and governance.
Peter Moyo Chairman

New beginnings

There is no doubt in my mind that this is an exciting time to be of service to Vodacom; this being a time of review and renewal, of defining events and new beginnings, and of concentrated focus on equipping the business in every measure for a new world of vast opportunity and unprecedented risk. But chief among the reasons for my sense of excitement in accepting the position of Chairman was Vodacom’s energetic and highly capable management team, led by Pieter Uys. This team is tasked with taking Vodacom into the future as a total communications provider with its sights set on leadership in sub-Saharan Africa, a broadened strategic vision that is providing new growth impetus for the Group. The clarity of Pieter’s vision and his infectious passion for Vodacom and its philosophy and prospects, I have found to be both refreshing and reflected in the dynamism of the management team as a whole.

The quality of Vodacom’s leadership bench extends to a strong and balanced Board, structured to meet the JSE Limited listing requirements and the recommendations of King II, with the necessary depth of expertise and sufficient independent oversight to ensure both strategic guidance and accountability to all stakeholders. We are well aware of the responsibility that is ours as Vodacom enters its future as a listed company, particularly in a highly regulated industry. I bid welcome to our new non-executive directors Phuti Malabie, Tom Boardman, Thoko Mokgosi- Mwantembe, Morten Lundal, James Maclaurin, Michael Joseph and Ronald Schellekens, and look forward to extending the strong start we have made.

Vodacom’s shareholder profile changed significantly in the year and it is appropriate at this juncture to acknowledge Vodacom’s founding shareholders for their part in shaping the Group’s development. In a series of conditional transactions, Telkom agreed to sell 15% of its shares in Vodacom to Vodafone Holdings (SA) (Proprietary) Limited, raising its stake to 65%. Telkom’s remaining 35% stake was unbundled to its shareholders, which resulted in Vodacom listing on the JSE Limited on 18 May 2009. Together with the shareholders gained through Vodacom South Africa’s R7.5 billion broad-based black economic empowerment (BBBEE) transaction in October 2008, this has given Vodacom some 200 000 new shareholders, a broad and diverse base that befits Vodacom’s ethos.

Vodacom’s relationship with Vodafone over the last 16 years has been fruitful. The ongoing support and benefits of being a subsidiary of a leading multinational operator and top-ten global brand are central features of the Group’s value proposition and growth strategy. The multiple benefits of this new status range from world-class research and product development to procurement strength and powerful brand association. Vodafone also brings a span of relevant experience to the Vodacom Board which will assist management to steer the Group with the right combination of entrepreneurial flair and ample circumspection in rapidly developing and highly competitive markets, circumscribed by complex regulatory environments.

Vodacom has excellent credentials in a sector whose rapid advance offers revolutionary possibilities for the citizens of Africa. These credentials are underpinned by the Group’s leading market positions and unique platform for growth, which was strengthened by the acquisition of pan-African carrier and connectivity leader Gateway late last year. Furthermore, Vodacom’s track record bears out its consistent investment in technology leadership and high calibre people, brought together by a performance-driven culture that rewards innovation and excellence.

Vodacom’s focus on the customer has kept it at the forefront of innovation, particularly in finding more affordable ways to connect people and offering value-added new services. The company’s vision of democratising access to voice and data services in sub-Saharan Africa is premised on the understanding that affordability is a key driver of penetration and usage. From providing access to low-cost handsets, competitively priced airtime or broadband connectivity, or the latest value-added products and converged services, Vodacom understands that it competes on value.

In a cost-constrained economic environment, customers not only expect added value for their communications spending but also look to ICT to help them operate more efficiently. Vodacom’s track record of innovation and early adoption of new technologies, and the urgency it has demonstrated in implementing these, stands it in good stead to stay abreast of advancing global standards and in a position to realise the efficiencies associated with subsequent generations of technology.

A resilient performance

It is pleasing to record that in the face of significantly heightened economic risk, the Group has displayed resilience. A solid financial performance was achieved in the year ending 31 March 2009, even as the global economic downturn deepened its bite in the Group’s operating markets. Higher inflation, driven largely by fuel and food prices, rising cost of debt and currency weakness were features of the operating conditions in South Africa, as was the impact of the commodity price slump on the resources sector. In the DRC, this affected the country’s mining-reliant economy severely.

Vodacom’s unwavering focus on customers has seen it grow its customer base by 5.6 million to nearly 40 million customers and to increase the penetration of data services, which lifted revenue 14.5% to R55 187 million. Headline earnings per share were however 21.0% lower at 417 cents per share, largely due to the BBBEE share-based charge of R1 382 million and a substantial increase in finance charges arising from the restructuring of the balance sheet to ensure greater efficiency. Notable for me in this set of results is that the Group’s cash flows remain healthy at some R9 140 million operating free cash flow after capital expenditure of R6 906 million. Going forward, this will allow the Group to invest as necessary in defending its leadership positions and in pursuit of its growth strategy, while also delivering competitive returns to shareholders.

Dividends declared for the year ended 31 March 2009 totalled R5 200 million with the final dividend of R2 200 million paid on 8 April 2009.

As a private company, Vodacom has historically paid a dividend equal to approximately all of its free cash flow on a semi-annual basis. As a publicly listed entity and for the financial year ending 31 March 2010, Vodacom anticipates a dividend payout ratio of around 40% of headline earnings. The first dividend is expected to be the interim dividend for the 2010 financial year.

Focusing on stakeholder relations and sustainability

In South Africa, we pay our respects to the late Minister of Communications, Dr. Ivy Matsepe-Casaburri, and look forward to building a relationship with the new Minister, Mr. Siphiwe Nyanda, founded on the constructive interaction that has characterised the relationship with the Ministry so far. It bears stating here that Vodacom’s drive to democratise access to world-class communications coincides with the objectives of government and the regulatory authority to broaden access to affordable communications and bring down the cost of doing business in South Africa. We are committed to work constructively with the Department of Communications and ICASA to realise our common aim.

During the period under review, Vodacom South Africa’s existing licence was converted into individual electronic communications service (“ECS”) and electronic communications network service (“ECNS”) licences as part of the managed liberalisation process enabled by the Electronic Communications Act of 2006 (“ECA”). This remains a complex and evolving regulatory environment which is mirrored largely in similar changes in the regulatory regimes in all the countries in which the Group operates.

In a world in the throes of structural change and the realignment of the values of business and society, and in the face of unprecedented environmental challenges, the risk of not responding decisively to the pressing challenges of sustainable development loom large. Vodacom’s commitment to being a caring and active corporate citizen is especially important in this light. The initiatives that demonstrate this commitment are sketched in the sustainability overview, and detailed in the Group’s separately published Sustainability Report. They cover a wide range including best practice human resources management, making progress across all pillars of the BBBEE scorecard, and the important work done in focused socioeconomic development by the respective Vodacom Foundations in all the Group’s countries of operation. We celebrate the Vodacom Foundation’s tenth year with over R500 million spent in community social investment during the ten-year period. The Group also continues to tackle environmental risk through initiatives that include driving efficiency and reducing consumption of utilities, to recycling projects and responsible management of waste.

I have said that this is a time for review and renewal. As a publicly listed entity and a subsidiary of a leading multinational group, Vodacom’s corporate culture of being a high-profile and visible company sets a strong foundation for its commitment to the highest standards of integrity, accountability and governance. Part of the process of renewal is to ensure that the internal controls and culture of discipline necessary to manage risk, control costs and maximise operating efficiency are strengthened and entrenched. Improvements are also being made in the Group’s engagement with its stakeholders and initiatives are underway to formalise the necessary policies and processes. This is involving in-depth consultation with key stakeholder groups from which we expect to gain valuable insights to inform the way forward, and ensure we are able to consistently meet the expectations of all our stakeholders.

Prospects

It is a common refrain, but the difficulty in forecasting and providing definitive guidance due to the prevailing economic uncertainty must be noted. As customers continue to contain their spending, Vodacom will seek to offer them greater value. To further mitigate the pressure on top-line growth and preserve margins, driving efficiencies across the business will continue to be a priority. We expect trading conditions to remain challenging in the Group’s international operations, with economic weakness persisting and aggressive competition. The Group will weather the storm by staying efficient and competitive.

Appreciation and closing

In closing I wish to acknowledge Alan Knott-Craig, who kept Vodacom at the forefront of the development of the mobile communications industry in South Africa. The management team now at the helm is largely unchanged, ensuring consistency even as the business is renewed for the future.

I would like to thank the outgoing directors and particularly outgoing Chairman, Oyama Mabandla, for their valuable contributions to Vodacom’s success. I also congratulate every Vodacom employee on what has been achieved thus far, and I am confident that with their continued focus and dedication the Group is well positioned to weather the economic storm and to grow profitably in existing and new markets. I recognise and appreciate the contribution of Vodacom’s many suppliers and partners in all sectors of business and society, and look forward to their continued support in the years ahead.

I feel privileged to be joining the Vodacom Group at a decisive and exciting time in the company’s development. We can be sure of tough times ahead, but it is at times such as these that innovation and excellence at every level of business is most required, and tends to come to the fore. So while I am certain that Vodacom’s mettle will be tested further in the prevailing economic environment, I believe that we will not be found wanting.

Wesley, Jeandre and Gaiden with Vodacom Bulls player, Wynand Olivier Vodacom is encouraging the sporting public to get involved in corporate citizenship by supporting South Africa’s rugby, golf and soccer stars in raising funds for disadvantaged groups across the country. The campaigns link the company’s sports sponsorships to several community involvement initiatives that we support. It began with the 2008 Tries for Smiles campaign, in which Vodacom donated between R10 000 to R25 000 for every try scored during the Vodacom Super 14 Tournament to the Smile Foundation. This organisation facilitates reconstructive surgery for children with facial anomalies such as cleft lip and cleft palate, and various other forms of facial paralysis, abnormality or injury. Vodacom recently partnered with Netcare, who also performs cleft lip and palate operations, and the Walter Sisulu Paediatric Cardiac Centre for Africa, which provides cardiac operations to children, to extend the reach of the Tries for Smiles initiative. In the Birdies for Kiddies campaign, Vodacom donates R500 for each birdie scored by golfers in the Vodacom Origins of Golf Tournament. Funds are donated to five organisations supported by the Vodacom Foundation that nurture and care for children in need: Project NOAH (Nurturing Orphans of AIDS for Humanity), Ndlovu Medical Trust, the ACFS Community Education and Feeding Scheme, New Beginningz, and Women and Men Against Child Abuse (WMACA). Goals for Miracles provides a platform for the Vodacom sponsored soccer clubs to raise funds for cataract operations, performed countrywide through the South African National Council for the Blind (SANCB), the Pretoria Eye Institute’s Sight 4 U Cataract Project and the Netcare Vodacom Sight For You Programme. For every goal scored in regulation time by the clubs in this year’s Vodacom Challenge and the PSL Premier League competitions, Vodacom donates R50 000 to the organisations. Winning in more ways than one Raised R2 million during 2008, enabling 92 children to receive world class reconstructive facial surgery through Tries for Smiles R800 000 has been donated to various organisations raised through Birdies for Kiddies Over 4 000 elderly people have received free cataract operations through Goals for Miracles