While the macroeconomic outlook remains uncertain, South Africa is showing early signs of recovery based on some indicators of customer behaviour. However, it is too soon to be confident in a sustained recovery across all customer segments. The South African business is likely to continue to feel the impact of the implementation of RICA, but as distributors and customers grow more familiar with customer registration requirements, gross connections are expected to trend upward. Lower mobile termination rates are a likely consequence of the regulatory process currently underway, and Vodacom will work with government and the regulator to implement the reductions in a way that will minimise instability in the sector.

In the international operations, traffic volumes have picked up slightly in both Tanzania and DRC in response to significant price reductions. Management will prioritise reducing costs and increasing capital efficiencies to support lower tariffs over the longer term.

Notwithstanding its economic and competitive challenges, Gateway remains core to Vodacom’s expansion strategy in Africa, both in delivering business services and in broadband infrastructure. Progress is being made in restructuring the carrier services business to ensure it can be sustainably profitable in an environment of reduced mobile tariffs on the continent, but in the short-term Gateway’s profitability is expected to remain under pressure.

Vodacom will continue to implement projects to extract efficiencies and ensure cost leadership across the business. Vodacom’s group capital expenditure is expected to be R7.0 billion for the year ending 31 March 2010.

Vodacom is focused on broadening access to voice and data communications, and extending the socioeconomic development benefits of affordable world-class communications. This will remain a priority in the markets in which Vodacom operates as the global economy continues its recovery.

For and on behalf of the Board

9 November 2009
Midrand