Wrap Text
3rd Quarter results ended 31 December 2012
Vodacom Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/005461/06)
Share code VOD ISIN ZAE000132577
JSE code VOD006 ISIN ZAG000101692
News release
Vodacom Group Limited trading statement for the quarter ended 31 December 2012
6 February 2013
Salient features
- Group revenue up 1.7%. Excluding the sale of Gateway Carrier Services and the impact of movements in foreign currency,
revenue was up 4.8%* (6.7% excluding the impact of mobile termination rates ('MTRs')).
- Group data revenue up 23.3% with active data customers increasing 33.8% to 18.5 million as we continue to drive
smartphone penetration with increasing data bundles sold.
- Group active customers increased 12.2% to 51.0 million as we attracted new customers through compelling value offers,
superior network quality and network expansion.
- Continued growth from on-going International operations; service revenue up 22.0%* supported by strong customer growth
and increased adoption of data services.
- International data revenue growth of 100.0%, led by 72.6% growth in active M-Pesa customers to 4.7 million.
- South African service revenue declined by 1.7% (up 1.4% excluding the impact of MTRs) due to competitive and economic
pressures, coupled with a temporary impact from our actions to reduce unprofitable calling card1 SIMs.
- We extended our LTE coverage in South Africa to reach Johannesburg, Pretoria, Durban and Cape Town, with 542 active sites.
Quarter ended Year on year Quarterly
% change % change
Rm December 2012 Reported Normalised* Reported Normalised*
Revenue 18 294 1.7 4.8 5.1 7.1
South Africa 15 475 2.2 2.2 7.3 7.3
International 2 875 (3.6) 21.1 (6.0) 6.2
Service revenue 15 298 (1.7) 1.9 2.4 4.7
South Africa 12 532 (1.7) (1.7) 4.2 4.2
International 2 786 (4.1) 22.0 (6.0) 6.8
Shameel Joosub, Vodacom Group CEO commented:
"It's been a quarter with strong performances in data and our International operations tempered by some challenges in our
South African business. Our Group revenue expanded by 4.8%* year on year and 7.1%* quarter on quarter. Group data revenue grew
23% and revenue from the International operations grew 22%*.
Active customer growth across the Group was also positive, with the International base growing 13% and the South African base
growing 12%. While customers increased, voice revenue in South Africa was impacted by more active competition in a softer economy
coupled with the decision taken earlier in the year to discourage calling card1 behaviour. This was the right thing to do to improve
profitability but has temporarily impacted revenue growth.
During the quarter our investment activities were focused on maintaining network leadership, most clearly demonstrated by the
commercial launch of Vodacom's LTE service – the first in South Africa."
1. Calling card behaviour arises where airtime is bundled with a starterpack and sold at a discounted price by wholesalers. This results in customers acquiring the SIM
cards solely for use of the discounted airtime and discarding the SIM once the airtime value has been utilised.
* Represents normalised growth at a constant currency (using current year as base) from on-going operations. Refer below for a reconciliation of normalised growth.
All growth rates refer to the quarter compared to prior year unless stated otherwise.
Operating review
Group
Group revenue increased 1.7% to R18.3 billion. Revenue was impacted by the sale of Gateway Carrier Services on 31 August 2012 as
well as movements in foreign exchange. On a normalised basis, Group revenue increased 4.8%* due to the growth in data services and
International operations, partially offset by the impact of MTR cuts, competitive pricing pressures and continued economic weakness
in South Africa.
South Africa
Revenue increased 2.2% to R15.5 billion driven by the 27.2% growth in equipment revenue from smartphone and tablet sales. Service
revenue declined 1.7% year on year to R12.5 billion. Excluding the impact of regulated cuts in MTRs, service revenue increased 1.4%
driven by the continued expansion of the customer base and increased data revenue offsetting the downward pressure on voice and
messaging services.
Service revenue was seasonally stronger, up 4.2% on the September quarter. However year on year prepaid voice revenue growth was
impacted by the strong performance in the prior year December quarter when we experienced a boost to voice revenue from the
addition of high volumes of unprofitable calling card prepaid customers. As previously communicated, we took corrective action from
October 2012 to improve our customer base and reduce the volume of these once-off usage customers. As expected, we have seen
reduced revenue, higher churn and net disconnections in the quarter. However we have seen a reduction in our prepaid acquisition
costs and improved profitability in the prepaid customer base.
Active customers increased 11.7% year on year to 30.6 million as we continued to attract new customers to our network through
value offers and network investment. Prepaid active customers increased 13.2% to 24.7 million but overall usage was lower than
expected as customers benefited from various promotional offers resulting in prepaid ARPU declining 15.6% to R81. Contract
customers increased 6.0% to 5.9 million, adding almost double the net connections reported in each of the prior two quarters to
approximately 120 000 customers. The continued reduction of out of bundle voice spend contributed to the 9.1% decline in contract
customer ARPU to R329. Our new integrated plans, our strategy of offering "much-more-for-more" ('MM4M') and our "double your
summer" promotion resulted in an 8.9% decline in blended effective price per minute in the quarter. There has been a strong uptake
in the integrated voice, SMS and data price plans launched in July 2012 with almost a third of new mobile contract customers during
the quarter opting for these plans.
Data revenue increased 17.2% to R2.3 billion, contributing 18.0% to service revenue compared to 15.1% a year ago. Data traffic grew
29.8% which more than offset the 13.5% reduction in our average effective price per MB. Smartphones remain a key strategic growth
driver with active smartphones increasing 29.2% to 5.8 million devices. Smartphone net additions increased in the quarter compared
to prior quarters, adding over 500 000 to our network largely supported by our working capital investment in handset financing.
Smartphone usage increased 36.1% to 138 MB per smartphone customer per month. The appetite for data services amongst our
customer base remains strong, with active data customers increasing 20.9% to 13.8 million representing 45.2% of our customer base.
Customers purchasing data bundles are growing at 31.6% to 5.1 million as we execute on our strategy to move customers to bundles.
Continued network investment is an important differentiator for Vodacom. Our LTE services now include data, voice and SMS services
and we have reached over 540 LTE sites covering major cities. We made further significant investments to improve the speed and
coverage of our 3G network adding 317 base stations in the quarter to 5 855. We also continue to invest in increasing the capacity of
our voice network to support higher customer usage.
International
Reported service revenue declined 4.1% to R2.8 billion due to the sale of Gateway Carrier Services. Excluding the sale and the impact
from movements in foreign currency, service revenue increased 22.0%*. Improved distribution and focussed customer value
propositions have resulted in active customers increasing 12.9% to 20.4 million and outgoing traffic increasing by 69.3% more than
offsetting the pricing pressures in most of our markets.
Data revenue increased 100.0% to R306 million, contributing 11.0% to service revenue compared to 5.3% a year ago driven by the
increased take up of mobile internet services in all markets and the increased penetration of mobile financial services in Tanzania.
Data customers grew 95.4% to 4.7 million; almost a quarter of our active customer base is now actively using data.
M-Pesa is progressing well in Tanzania, with active customers increasing 72.6% to 4.7 million and M-Pesa revenue now accounts for
74.6% of Tanzania's overall data revenue and 14.1% of service revenue. We launched M-Pesa in DRC in the period and expect to
expand the service to Mozambique and Lesotho before year end.
We have accelerated our capital expenditure programme in Tanzania to improve capacity and coverage.
The quarterly information has not been audited or reviewed by Vodacom's external auditors.
Financial review for the quarters ended
Revenue
Year on year Quarterly
December September December % change % change
Rm 2012 2012 2011 Reported Normalised* Reported Normalised*
South Africa 15 475 14 426 15 135 2.2 2.2 7.3 7.3
International 2 875 3 058 2 983 (3.6) 21.1 (6.0) 6.2
Corporate and eliminations (56) (82) (121) 53.7 (5.7) 31.7 (16.7)
Revenue 18 294 17 402 17 997 1.7 4.8 5.1 7.1
Service revenue
Year on year Quarterly
December September December % change % change
Rm 2012 2012 2011 Reported Normalised* Reported Normalised*
South Africa 12 532 12 031 12 755 (1.7) (1.7) 4.2 4.2
International 2 786 2 964 2 905 (4.1) 22.0 (6.0) 6.8
Corporate and eliminations (20) (56) (93) 78.5 23.1 64.3 9.1
Service revenue 15 298 14 939 15 567 (1.7) 1.9 2.4 4.7
Key indicators for the quarters ended
South Africa key indicators
December September December Year on year Quarterly
2012 2012 2011 % change % change
Active customers (thousand)1 30 581 30 783 27 373 11.7 (0.7)
Prepaid 24 712 25 031 21 835 13.2 (1.3)
Contract 5 869 5 752 5 538 6.0 2.0
Churn (%)2 54.9 46.8 30.7
Prepaid 62.9 53.3 35.3
Contract 9.4 9.7 10.1
Traffic (millions of minutes)3 9 631 9 940 9 012 6.9 (3.1)
Outgoing 7 238 7 634 6 741 7.4 (5.2)
Incoming 2 393 2 306 2 271 5.4 3.8
MOU per month4 105 107 114 (7.9) (1.9)
Prepaid 93 95 99 (6.1) (2.1)
Contract 156 158 171 (8.8) (1.3)
Total ARPU (rand per month)5 134 127 161 (16.8) 5.5
Prepaid 81 74 96 (15.6) 9.5
Contract 329 337 362 (9.1) (2.4)
Notes:
1. Active customers are based on the total number of mobile customers using any service during the last three months. This includes customers paying a
monthly fee that entitles them to use the service even if they do not actually use the service and those customers who are active whilst roaming.
2. Churn is calculated by dividing the annualised number of disconnections during the period by the average monthly customers during the period.
3. 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.
4. Minutes of use ('MOU') per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly active customers
during the period.
5. Total ARPU is calculated by dividing the average monthly service revenue by the average monthly active customers during the period. Prepaid and contract
ARPU only include service revenue generated from Vodacom mobile customers.
Key indicators for the quarters ended (continued)
International key indicators
December September December Year on year Quarterly
2012 2012 2011 % change % change
Active customers (thousand)1 20 375 19 341 18 047 12.9 5.3
Tanzania 9 357 8 968 9 417 (0.6) 4.3
DRC 7 086 6 696 5 118 38.5 5.8
Mozambique 2 861 2 734 2 717 5.3 4.6
Lesotho 1 071 943 795 34.7 13.6
Churn (%)2
Tanzania 60.1 78.7 37.7
DRC 69.2 83.0 66.5
Mozambique 73.2 61.1 48.2
Lesotho 38.9 50.5 24.3
MOU per month3
Tanzania 102 88 62 64.5 15.9
DRC 48 46 42 14.3 4.3
Mozambique 86 75 57 50.9 14.7
Lesotho 34 32 37 (8.1) 6.3
Total ARPU (rand per month)4
Tanzania 40 39 28 42.9 2.6
DRC 35 36 38 (7.9) (2.8)
Mozambique 64 47 62 3.2 36.2
Lesotho 57 57 74 (23.0) –
Total ARPU (local currency per month)4
Tanzania (TZS) 7 317 7 446 5 770 26.8 (1.7)
DRC (USD) 4.1 4.3 4.7 (12.8) (4.7)
Mozambique (MZN) 217 161 204 6.4 34.8
Notes:
1. Active customers are based on the total number of mobile customers using any service during the last three months. This includes customers paying a
monthly fee that entitles them to use the service even if they do not actually use the service and those customers who are active whilst roaming.
2. Churn is calculated by dividing the annualised number of disconnections during the period by the average monthly customers during the period. During the
quarter ended 30 June 2012, Tanzania, Mozambique and Lesotho changed their disconnection policy from 215 days to 90 days inactivity.
3. Minutes of use ('MOU') per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly active customers
during the period.
4. Total ARPU is calculated by dividing the average monthly service revenue by the average monthly active customers during the period.
Financial review for the quarters ended
Historical financial review for the quarters ended
Revenue
December September June March December September June
Rm 2012 2012 2012 2012 2011 2011 2011
South Africa 15 475 14 426 14 007 14 379 15 135 13 881 13 537
International 2 875 3 058 3 097 2 930 2 983 2 394 2 119
Corporate and eliminations (56) (82) (80) (124) (121) (97) (87)
Revenue 18 294 17 402 17 024 17 185 17 997 16 178 15 569
Service revenue
December September June March December September June
Rm 2012 2012 2012 2012 2011 2011 2011
South Africa 12 532 12 031 11 769 12 167 12 755 11 947 11 558
International 2 786 2 964 3 028 2 848 2 905 2 326 2 064
Corporate and eliminations (20) (56) (61) (89) (93) (73) (70)
Service revenue 15 298 14 939 14 736 14 926 15 567 14 200 13 552
Key indicators for the quarters ended
Historical key indicators for the quarters ended
South Africa
December September June March December September June
2012 2012 2012 2012 2011 2011 2011
Active customers (thousand)1 30 581 30 783 30 970 28 941 27 373 25 261 23 991
Prepaid 24 712 25 031 25 284 23 312 21 835 19 822 18 671
Contract 5 869 5 752 5 686 5 629 5 538 5 439 5 320
Churn (%)2 54.9 46.8 37.8 36.7 30.7 44.6 35.5
Prepaid 62.9 53.3 43.3 42.4 35.3 53.0 41.9
Contract 9.4 9.7 8.7 8.3 10.1 8.9 8.5
Traffic (millions of minutes)3 9 631 9 940 8 657 8 690 9 012 9 186 8 141
Outgoing 7 238 7 634 6 459 6 471 6 741 7 050 6 079
Incoming 2 393 2 306 2 198 2 219 2 271 2 136 2 062
MOU per month4 105 107 96 103 114 125 116
Prepaid 93 95 81 85 99 109 97
Contract 156 158 158 174 171 181 181
Total ARPU (rand per month)5 134 127 130 144 161 162 164
Prepaid 81 74 73 83 96 92 95
Contract 329 337 333 348 362 370 369
Key indicators for the quarters ended (continued)
Historical key indicators for the quarters ended (continued)
International
December September June March December September June
2012 2012 2012 2012 2011 2011 2011
Active customers (thousand)1 20 375 19 341 18 971 18 894 18 047 16 225 14 657
Tanzania 9 357 8 968 9 065 9 665 9 417 8 432 7 656
DRC 7 086 6 696 6 240 5 643 5 118 4 782 4 245
Mozambique 2 861 2 734 2 700 2 784 2 717 2 275 2 054
Lesotho 1 071 943 966 802 795 736 702
Churn (%)2
Tanzania 60.1 78.7 72.5 41.8 37.7 35.2 43.5
DRC 69.2 83.0 75.6 72.2 66.5 64.3 75.3
Mozambique 73.2 61.1 54.0 40.8 48.2 111.7 42.5
Lesotho 38.9 50.5 22.0 21.6 24.3 24.5 20.3
MOU per month4
Tanzania 102 88 66 57 62 69 65
DRC 48 46 43 40 42 47 43
Mozambique 86 75 63 56 57 50 55
Lesotho 34 32 35 40 37 39 36
Total ARPU (rand per month)5
Tanzania 40 39 31 26 28 24 23
DRC 35 36 34 35 38 37 33
Mozambique 64 47 58 52 62 49 39
Lesotho 57 57 60 66 74 71 68
Total ARPU (local currency per
month)5
Tanzania (TZS) 7 317 7 446 5 945 5 365 5 770 5 508 5 213
DRC (USD) 4.1 4.3 4.2 4.5 4.7 5.1 4.7
Mozambique (MZN) 217 161 193 181 204 187 172
Notes:
1. Active customers are based on the total number of mobile customers using any service during the last three months. This includes customers paying a
monthly fee that entitles them to use the service even if they do not actually use the service and those customers who are active whilst roaming.
2. Churn is calculated by dividing the annualised number of disconnections during the period by the average monthly customers during the period. During the
quarter ended 30 June 2012, Tanzania, Mozambique and Lesotho changed their disconnection policy from 215 days to 90 days inactivity.
3. 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.
4. Minutes of use ('MOU') per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly active customers
during the period.
5. Total ARPU is calculated by dividing the average monthly service revenue by the average monthly active customers during the period. Prepaid and contract
ARPU only include service revenue generated from Vodacom mobile customers.
Revenue for the quarter ended 31 December 2012
South Africa Yoy % International Yoy % Corporate/ Group Yoy %
Rm change change Eliminations change
Mobile voice 7 573 (2.3) 1 719 19.4 (2) 9 290 1.1
Mobile interconnect 1 317 (18.2) 311 46.0 (8) 1 620 (9.6)
Mobile messaging 777 (5.6) 122 62.7 – 899 0.1
Mobile data 2 261 17.2 306 100.0 – 2 567 23.3
Other service revenue 604 (5.5) 328 (68.0) (10) 922 (42.4)
Service revenue 12 532 (1.7) 2 786 (4.1) (20) 15 298 (1.7)
Equipment revenue 2 808 27.2 41 5.1 (8) 2 841 27.1
Non-service revenue 135 (21.5) 48 23.1 (28) 155 (20.1)
Revenue 15 475 2.2 2 875 (3.6) (56) 18 294 1.7
Reconciliation of normalised growth
Year on year reconciliation
Translation foreign Gateway Carrier
Reported1 exchange2 Services3 Normalised
% change ppt ppt % change
11/12 11/12
Revenue
Group 1.7 (1.2) 4.3 4.8
International (3.6) (6.4) 31.1 21.1
Service revenue
Group (1.7) (1.3) 4.9 1.9
International (4.1) (6.3) 32.4 22.0
The reconciliation represents normalised growth at a constant currency (using current period as base) from on-going operations. The
presentation of the pro-forma constant currency information from on-going operations is the responsibility of the directors of
Vodacom Group Limited. The purpose to presenting this information is to assist the user in understanding the underlying growth
trends in these segments. It has been prepared for illustrative purposes only and may not fairly present the financial position, changes
in equity, results of operations or cash flows of Vodacom Group Limited. This information has not been reviewed and reported on by
the Group's auditors.
Notes:
1. The reported percentage change relates to the quarter to date year on year percentage growth between 31 December 2011 and 31 December 2012. The Group's
presentation currency is the South African rand. Our International operations include functional currencies in United States dollar, Tanzanian shilling and
Mozambican metical. The prevailing exchange for the current and comparative periods are disclosed below.
2. Translation foreign exchange arises from the translation of the results, at average rates, of subsidiaries' functional currencies to Vodacom's presentation currency,
being rand. The exchange variances are eliminated by applying the quarter 31 December 2012 average rate (which is derived by dividing the individual subsidiary's
translated rand value with the functional currency for the quarter) to 31 December 2011 quarter numbers, thereby giving a user a view of the performance which
excludes exchange variances. The prevailing exchange rate for the current and comparative quarters are disclosed below.
3. The Group disposed of its subsidiary, Gateway Carrier Services, effective 31 August 2012. We have excluded Gateway Carrier Services from the above calculation
to give the user insight into the underlying performance of our on-going operations.
Quarter on quarter reconciliation
Translation foreign Gateway Carrier
Reported1 exchange2 Services3 Normalised
% change ppt ppt % change
11/12 11/12
Revenue
Group 5.1 (0.7) 2.7 7.1
International (6.0) (3.8) 16.0 6.2
Service revenue
Group 2.4 (0.8) 3.1 4.7
International (6.0) (3.8) 16.6 6.8
The reconciliation represents normalised growth at a constant currency (using current year as base) from on-going operations. The
presentation of the pro-forma constant currency information from on-going operations is the responsibility of the directors of
Vodacom Group Limited. The purpose to presenting this information is to assist the user in understanding the underlying growth
trends in these segments. It has been prepared for illustrative purposes only and may not fairly present the financial position, changes
in equity, results of operations or cash flows of Vodacom Group Limited. This information has not been reviewed and reported on by
the Group's auditors.
Notes:
1. The reported percentage change relates to the quarter to date quarter on quarter percentage growth between 30 September 2012 and 31 December 2012. The
Group's presentation currency is the South African rand. Our International operations include functional currencies in United States dollar, Tanzanian shilling and
Mozambican metical. The prevailing exchange for the current and comparative periods are disclosed below.
2. Translation foreign exchange arises from the translation of the results, at average rates, of subsidiaries' functional currencies to Vodacom's presentation currency,
being rand. The exchange variances are eliminated by applying the quarter 31 December 2012 average rate (which is derived by dividing the individual subsidiary's
translated rand value with the functional currency for the quarter) to 30 September 2012 numbers, thereby giving a user a view of the performance which
excludes exchange variances. The prevailing exchange rate for the current and comparative quarters are disclosed below.
3. The Group disposed of its subsidiary, Gateway Carrier Services, effective 31 August 2012. We have excluded Gateway Carrier Services from the above calculation
to give the user insight into the underlying performance of our on-going operations.
Average quarterly exchange rates
December September December Year on year Quarterly
2012 2012 2011 % change % change
USD/ZAR 8.69 7.15 8.10 7.3 21.5
ZAR/MZN 3.40 3.86 3.32 2.4 (11.9)
ZAR/TZS 183.01 226.02 208.36 (12.2) (19.0)
EUR/ZAR 11.28 10.09 10.92 3.3 11.8
Non-GAAP information
This trading statement contains certain non-GAAP financial information which has not been reviewed or reported on by the Group's
auditors. 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
Vodafone, the Vodafone logo, Vodacom and Vodacom M-Pesa, are trademarks of Vodafone Group Plc (or have applications pending).
Other product and company names mentioned herein may be trademarks of their respective owners.
Forward-looking statements
This trading statement which sets out the quarterly results for Vodacom Group Limited for the quarter ended 31 December 2012
contains 'forward-looking statements', which have not been reviewed or reported on by the Group's auditors, 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.
Sponsor: UBS South Africa (Pty) Limited
Debt sponsor: Absa Capital (the investment banking division of Absa Bank Limited and affiliated with Barclays)
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