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VOD - Vodacom Group Limited - Vodacom Group Limited trading statement for

Release Date: 21/07/2011 07:05
Code(s): VOD
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VOD - Vodacom Group Limited - Vodacom Group Limited trading statement for the quarter ended 30 June 2011 Vodacom Group Limited (Incorporated in the Republic of South Africa) (Registration number 1993/005461/06) (JSE share code: VOD) ISIN: ZAE000132577 (`Vodacom`) News release 21 July 2011 Vodacom Group Limited trading statement for the quarter ended 30 June 2011 Highlights Brand refresh underpins solid Group performance - Group revenue up 8.1% (9.6%*) - Group service revenue up 5.9% (7.5%*) - Group customers up 20.4% to 45.4 million - Net customer additions of 1.9 million in the quarter Continued robust data growth - Group data revenue growth of 37.6% - 43.3% increase in Group active data customers to 10.9 million - Mobile internet bundle customers up 86.0% to 3.0 million Strong commercial success in South Africa - Revenue up 7.7% - Service revenue up 5.0% (7.4% excluding the impact of MTRs) - Customers up 19.7% to 27.7 million, adding 1.2 million in the quarter - Data revenue growth of 35.4% Encouraging revenue trends in International operations - Service revenue up 11.0% (23.7%*) - Customers up 21.5% to 17.7 million, adding 729 000 in the quarter Pieter Uys, Vodacom Group CEO commented: "This quarter started on a high note with our team delivering a really well executed brand refresh. Internally we used the opportunity to signal a new direction and culture, involving all our employees in how we approach our vision of making every customer smile. The positive sentiment from the refresh was mirrored by good performances from both the South African and International operations. Strong data growth was again a major feature with Group data revenue increasing 37.6% and active data customers increasing 43.3% to 10.9 million. This helped support overall Group revenue growth of 8.1%. In South Africa, we added 1.2 million customers in the quarter, coupled with a 16.3% year on year increase in average minutes of use. This helped to offset a reduction in our average effective price per minute of 24.8%. We continued to drive investment in the network, adding 107 new 3G base stations in the quarter. I`m also pleased to say that for another successive quarter we saw an improvement from the International operations with service revenue growing 11.0% (23.7%*) and customers increasing 21.5%. Not everything went our way this quarter. We unfortunately experienced some outages in our South African network. While the financial impact was minimal, the negative impact on the customer experience was not acceptable. We have subsequently installed more fibre capacity and upgraded certain software to avoid future disruptions. Our number one priority over the coming months is to ensure that our customers get the best possible network experience." Operating review Group Group service revenue increased 5.9% (7.5%*) mainly due to customer growth of 20.4% and a 37.6% growth in data revenue offsetting the reduced mobile interconnect revenue and lower effective prices per minute. Customers increased 1.9 million in the quarter to 45.4 million. The active data customers increased 43.3% to 10.9 million. Revenue grew faster than service revenue at 8.1% (9.6%*) boosted by strong handset sales. Competition remains intense in all our markets and we expect further pressure on pricing in the future. South Africa South Africa delivered a robust performance with service revenue growing 5.0% to R11 558 million mainly due to the robust data growth. Revenue increased 7.7% outpacing service revenue growth, largely due to a 28.0% increase in equipment revenue. Customers increased 19.7% to 27.7 million, adding 1.2 million in the quarter. Prepaid customers closed at 22.4 million adding just over 1.0 million in the quarter. Contract customer growth remained strong, up 13.9% to 5.3 million. Gross connections were up 58.9% to 3.6 million coupled with a slight decrease in churn (excluding the change in the disconnection rule). Vodacom had registered 96.6% of the customer base for RICA at 30 June 2011, approximately 953 000 customers did not register and we were obliged to lock their SIMs. As at 11 July 2011, about 205 000 of these customers had registered and their service has since been reactivated. The SIMs locked due to RICA will be removed from our customer base in line with our disconnection rule. Total ARPU was down 4.7% to R142, largely due to a 24.8% reduction in the effective price per minute, offset by a 16.3% increase in average minutes of use stimulated by off-peak promotional offers. Contract ARPU was down 10.2% to R369 due to strong growth of lower end contract packages and reduced out of bundle spend. Prepaid ARPU remained flat at R79. Data revenue increased 35.4% to R1 856 million and active data customers grew 37.7% to 9.6 million. We continued to increase the penetration of data bundles into our customer base with mobile internet bundle customers1 up 86.0% to 3.0 million, adding 425 000 in the quarter due to the continued success of BlackBerryRegistered sales, our low-end internet starter pack and our Red is Mofaya promotion. PC connectivity devices increased by approximately 43 000 in the quarter to 1.1 million. Active smartphones on the network increased by more than 406 000 in the quarter to 3.7 million. We continued to make substantial investments in the network, to enhance quality and support the growth in data traffic, adding 107 3G base stations in the quarter. International Revenue in the International operations increased by 10.2% (23.3%*) to R2 119 million. Service revenue increased by 11.0% (23.7%*) to R 2 064 million, largely due to growth in voice traffic of 10.8% offset by a decline in the effective price per minute of 2.3%. In local currencies, ARPU in Tanzania and Mozambique increased year on year. The International operations recorded customer growth of 21.5% to 17.7 million, adding 729 000 customers in the quarter. While data revenue is only 4.4% of service revenue in the International operations, it increased by 109.3% mainly due to strong growth in M-Pesa active customers to 1.6 million in Tanzania, adding just over 342 000 in the quarter. * Growth at constant currency. # South African operation only. 1. A unique count of customers who have made a commitment to use data, either as part of their primary offering, or as an additional bundle. Includes customers using the BlackBerryRegistered service. The quarterly information has not been audited or reviewed by Vodacom`s external auditors. Financial review for the quarters ended Revenue June March June Year on Quar- year terly Rm 2011 2011 2010 % change % change South Africa 13 537 13 602 12 567 7.7 (0.5) International 2 119 2 138 1 922 10.2 (0.9) Corporate and (87) (92) (83) (4.8) 5.4 eliminations Revenue 15 569 15 648 14 406 8.1 (0.5) Service revenue June March June Year on Quar- year terly
Rm 2011 2011 2010 % change % change South Africa 11 558 11 863 11 012 5.0 (2.6) International 2 064 2 081 1 859 11.0 (0.8) Corporate and (70) (74) (69) (1.4) 5.4 eliminations Service revenue 13 552 13 870 12 802 5.9 (2.3) Key indicators for the quarters ended South Africa key indicators June March June Year on Quar- year terly 2011 2011 2010 % change % change Customers (thousand)1 27 731 26 535 23 161 19.7 4.5 Prepaid2 22 411 21 409 18 489 21.2 4.7 Contract 5 320 5 126 4 672 13.9 3.8 Churn (%)3 35.5 28.5 87.2 Prepaid2 41.9 33.0 105.0 Contract 8.5 9.7 9.5 Traffic (millions of 8 141 8 108 6 371 27.8 0.4 minutes)4 Outgoing 6 079 6 060 4 442 36.9 0.3 Incoming 2 062 2 048 1 929 6.9 0.7 MOU per month5 100 104 86 16.3 (3.8) Prepaid2 81 82 59 37.3 (1.2) Contract 181 195 205 (11.7) (7.2) Total ARPU (Rand per 142 153 149 (4.7) (7.2) month)6 Prepaid2 79 85 79 - (7.1) Contract 369 387 411 (10.2) (4.7) Notes: 1. Customers are based on the total number of mobile customers registered on Vodacom`s network, which have not been disconnected, including inactive customers, at the end of the period indicated. 2. South Africa changed its disconnection policy for call-forward SIMs from 13 months inactivity to seven months during the quarter ended 30 June 2010. Prior year numbers have not been restated. 3. Churn is calculated by dividing the annualised number of disconnections during the period by the average monthly total reported mobile customer base during the period. 3.3 million customers were deleted during the June 2010 quarter, due to the change in the disconnection rule. Excluding the 3.3 million deletions, total churn was 36.4% and prepaid churn was 43.1% for the quarter ended June 2010. 4. Traffic comprises of total traffic registered on Vodacom`s mobile network, including bundled minutes, promotional minutes and outgoing international roaming calls, but excluding national roaming calls, incoming international roaming calls and calls to free services. 5. Minutes of use (`MOU`) per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly total reported mobile customer base during the period. 6. Total ARPU is calculated by dividing average monthly service revenue by the average monthly total reported mobile customer base during the period. Prepaid and contract ARPU only includes service revenue generated from Vodacom customers. International key indicators June March June Year on Quar- year terly 2011 2011 2010 % change % change
Customers (thousand)1 17 686 16 957 14 561 21.5 4.3 Tanzania 9 260 8 861 8 009 15.6 4.5 DRC 4 245 4 155 3 419 24.2 2.2 Mozambique 3 277 3 082 2 411 35.9 6.3 Lesotho 904 859 722 25.2 5.2 Churn (%)2 Tanzania 43.5 51.1 42.9 DRC 75.3 45.3 77.5 Mozambique 42.5 43.0 76.9 Lesotho 20.3 21.5 17.2 MOU per month3 Tanzania 54 53 58 (6.9) 1.9 DRC 43 38 56 (23.2) 13.2 Mozambique 34 36 29 17.2 (5.6) Lesotho 28 32 31 (9.7) (12.5) Total ARPU (Rand per month)4 Tanzania 19 19 22 (13.6) - DRC 33 34 39 (15.4) (2.9) Mozambique 24 22 22 9.1 9.1 Lesotho 54 55 62 (12.9) (1.8) Total ARPU (local currency)4 Tanzania (TZS) 4 276 4 098 4 127 3.6 4.3 DRC (USD) 4.8 4.9 5.2 (7.7) (2.0) Mozambique (MZN) 106 102 98 8.2 3.9 Notes: 1. Customers are based on the total number of mobile customers registered on Vodacom`s network, which have not been disconnected, including inactive customers, as at the end of the period indicated. 2. Churn is calculated by dividing the annualised number of disconnections during the period by the average monthly total reported mobile customer base during the period. 3. Minutes of use (`MOU`) per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly total reported mobile customer base during the period. 4. Total ARPU is calculated by dividing average monthly service revenue by the average monthly total reported mobile customer base during the period. Historical key indicators for the quarters ended Revenue June March De- Sep- June March De-cember 2011 2011 cember tember 2010 2010 2009 Rm 2010 2010 South 13 537 13 602 14 072 13 130 12 567 12 621 13 439 Africa Inter- 2 119 2 138 2 056 2 080 1 922 1 893 2 066 national Corporate (87) (92) (95) (100) (83) (79) (80) and elimi- nations Revenue 15 569 15 648 16 033 15 110 14 406 14 435 15 425 Service revenue June March De- Sep- June March De- 2011 2011 cember tember 2010 2010 cember Rm 2010 2010 2009 South Africa 11 558 11 863 12 075 11 442 11 012 11 236 11 645 Inter- 2 064 2 081 2 001 2 016 1 859 1 822 1 997 national Corporate (70) (74) (78) (76) (69) (67) (52) and elimi- nations Service 13 552 13 870 13 998 13 382 12 802 12 991 13 590 revenue South Africa June March De- Sep- June March De- 2011 2011 cember tember 2010 2010 cember 2010 2010 2009
Customers 27 731 26 535 25 302 23 873 23 161 26 262 27 102 (thousand)1 Prepaid2 22 411 21 409 20 310 19 074 18 489 21 765 22 753 Contract 5 320 5 126 4 992 4 799 4 672 4 497 4 349 Churn (%)3 35.5 28.5 32.7 35.9 87.2 42.9 41.5 Prepaid2 41.9 33.0 38.3 42.5 105.0 49.6 47.5 Contract 8.5 9.7 10.3 9.6 9.5 9.1 8.8 Traffic 8 141 8 108 8 402 7 352 6 371 6 379 6 655 (millions of minutes)4 Outgoing 6 079 6 060 6 307 5 351 4 442 4 434 4 632 Incoming 2 062 2 048 2 095 2 001 1 929 1 945 2 023 MOU per 100 104 114 105 86 80 80 month5 Prepaid2 81 82 92 79 59 53 55 Contract 181 195 202 207 205 214 220 Total ARPU 142 153 164 163 149 140 140 (Rand per month)6 Prepaid2 79 85 93 90 79 74 76 Contract 369 387 408 411 411 436 455 International June March De- Sep- June March De- 2011 2011 cember tember 2010 2010 cember
2010 2010 2009 Customers 17 686 16 957 16 288 15 504 14 561 13 630 13 352 (thousand)1 Tanzania 9 260 8 861 8 665 8 421 8 009 7 270 6 878 DRC 4 245 4 155 3 847 3 638 3 419 3 353 3 522 Mozambique 3 277 3 082 2 953 2 676 2 411 2 329 2 312 Lesotho 904 859 823 769 722 678 640 Churn (%)3 Tanzania 43.5 51.1 41.5 41.9 42.9 42.3 43.3 DRC 75.3 45.3 80.8 91.1 77.5 50.9 157.5 Mozambique 42.5 43.0 45.3 65.3 76.9 68.9 61.1 Lesotho 20.3 21.5 24.6 20.2 17.2 17.4 19.5 MOU per month5 Tanzania 54 53 58 55 58 69 74 DRC 43 38 74 77 56 44 37 Mozambique 34 36 43 49 29 28 33 Lesotho 28 32 32 33 31 33 49 Total ARPU (Rand per month)6 Tanzania 19 19 20 21 22 25 28 DRC 33 34 32 39 39 31 35 Mozambique 24 22 23 22 22 23 27 Lesotho 54 55 62 60 62 63 73 Total ARPU (local currency)6 Tanzania 4 276 4 098 4 330 4 393 4 127 4 472 5 060 (TZS) DRC (USD) 4.8 4.9 4.7 5.3 5.2 4.3 4.7 Mozambique 106 102 115 109 98 96 109 (MZN) Notes: 1. Customers are based on the total number of mobile customers registered on Vodacom`s network, which have not been disconnected, including inactive customers, at the end of the period indicated. 2. South Africa changed its disconnection policy for call-forward SIMs from 13 months to seven months during the quarter ended 30 June 2010. Prior year numbers have not been restated. 3. Churn is calculated by dividing the annualised number of disconnections during the period by the average monthly total reported mobile customer base during the period. 4. Traffic comprises total traffic registered on Vodacom`s mobile network, including bundled minutes, promotional minutes and outgoing international roaming calls, but excluding national roaming calls, incoming international roaming calls and calls to free services. 5. Minutes of use (`MOU`) per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly total reported mobile customer base during the period. 6. Total ARPU is calculated by dividing average monthly service revenue by the average monthly total reported mobile customer base during the period. Prepaid and contract ARPU only include service revenue generated from Vodacom customers. Revenue for the quarter ended 30 June 2011 South Yoy % Inter- Yoy % Cor- Group Yoy % Africa change natio- change porate/ change
nal Elimi- Rm nations Mobile voice 7 028 2.8 942 7.5 (1) 7 969 3.3 Mobile 1 469 (10.4) 157 9.8 (30) 1 596 (9.6) interconnect Mobile 743 4.1 57 7.5 - 800 4.4 messaging Mobile data 1 856 35.4 90 109.3 - 1 946 37.6 Other service 462 2.2 818 9.9 (39) 1 241 8.5 revenue Service 11 558 5.0 2 064 11.0 (70) 13 552 5.9 revenue Equipment 1 819 28.0 30 - (13) 1 836 27.1 revenue Non-service 160 19.4 25 (24.2) (4) 181 13.8 revenue Revenue 13 537 7.7 2 119 10.2 (87) 15 569 8.1 Average quarterly exchange rates June March June Year on Quar- 2011 2011 2010 year terly%
% change change USD/ZAR 6.79 7.01 7.55 (10.1) (3.1) ZAR/MZN 4.43 4.53 4.52 (2.0) (2.2) ZAR/TZS 226.86 214.51 188.02 20.7 5.8 EUR/ZAR 9.78 9.58 9.60 1.9 2.1 Non-GAAP information This trading statement contains certain non-GAAP financial information. The Group`s management believes these measures provide valuable additional information in understanding the performance of the Group or the Group`s businesses because they provide measures used by the Group to assess performance. However, this additional information presented is not uniformly defined by all companies, including those in the Group`s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, although these measures are important in the management of the business, they should not be viewed in isolation or as replacements for or alternatives to, but rather as complementary to, the comparable GAAP measures. Trademarks 4U and Call Me are trademarks of Vodacom (Pty) Limited. Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox, Vodafone Passport, Vodafone live!, Vodacom, Vodacom M-Pesa, Vodacom Millionaires, Vodacom 4 Less and Vodacom Change the World are trademarks of Vodafone Group Plc (or have applications pending). The trademarks RIMRegistered, BlackBerryRegistered, are owned by Research in Motion Limited and are registered in the US and may be pending or registered in other countries. Microsoft, Windows Mobile and ActiveSync are either registered trademarks or trademarks of Microsoft Corporation in the US and/or other countries. Google, Google Maps and Android are trademarks of Google Inc. Apple, iPhone and iPad are trademarks of Apple Inc., registered in the US and other countries. Other product and company names mentioned herein may be trademarks of their respective owners. Forward-looking statements This trading statement for Vodacom Group Limited for the quarter ended 30 June 2011 contains unaudited `forward-looking statements` with respect to the Group`s financial condition, results of operations and businesses and certain of the Group`s plans and objectives. In particular, such forward- looking statements include statements relating to: the Group`s future performance; future capital expenditures, acquisitions, divestitures, expenses, revenues, financial conditions, dividend policy, and future prospects; business and management strategies relating to the expansion and growth of the Group; the effects of regulation of the Group`s businesses by governments in the countries in which it operates; the Group`s expectations as to the launch and roll out dates for products, services or technologies; expectations regarding the operating environment and market conditions; growth in customers and usage; and the rate of dividend growth by the Group. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as `will`, `anticipates`, `aims`, `could`, `may`, `should`, `expects`, `believes`, `intends`, `plans` or `targets`. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and other facts or factors which may cause the actual results, performance or achievements of the Group, or its industry to be materially different from any results, performance or achievement expressed or implied by such forward-looking statements. Forward- looking statements are not guarantees of future performance and are based on assumptions regarding the Group`s present and future business strategies and the environments in which it operates now and in the future. Midrand 21 July 2011 Sponsor: UBS South Africa (Pty) Limited Date: 21/07/2011 07:05:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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