Vodacom stepped up investment in the roll-out of high-speed data network in the first quarter as demand for internet connectivity grew during the lockdown even as the mobile phone company subscribed to a cautious 2020 outlook.
In a quarterly update that also provides a glimpse into how the industry has fared during the lockdown, Vodacom said it had increased spending by R500m in the three months to the end of June, bringing total expenditure to R2.7bn in its efforts to meet a surge in demand for internet data from locked-down consumers and business clients.
The company, which typically spends close to R10bn a year on infrastructure, said the amount was ahead of its spending targets for the quarter after recording an almost twofold increase in data traffic, which helped offset a nearly 10% drop in customers.
But Vodacom, which is controlled by Britain’s Vodafone, posted a cautious 2020 outlook, acknowledging the dilemma facing the industry, which may have to grapple with bad debts as companies bleed jobs even as their services become more essential than ever.
Farai Mapfinya, chief investment officer at Aequalis Asset Managers, said Vodacom had to strike "a fine balance" and the operator needed to focus on network quality, capital investment, pricing and customer service.
Group revenue grew 5.6% to R22.7bn year on year, though this is on a reported basis and includes the effects of currency movements. Excluding the effects of currency movements and mergers & acquisitions, group revenue rose 1.3%, Vodacom said.
Gryphon Asset Management portfolio manager Casparus Treurnicht said losing subscribers was "a tricky one" as there were "a lot of prepaid subscribers on their network that did not contribute to revenues".
Strong demand for voice, data and financial services contributed to the 6.4% increase in service revenue, which includes handsets growth in SA during the period, while the group’s international portfolio benefited significantly from currency changes to grow service revenue by 10.7%.
However, Treurnicht said, when it comes to efforts to entice customers to spend more, "retrenchments and business closures will start to make their mark as we roll along".
Roy Mutooni, equity analyst at Absa Asset Management said Vodacom was likely to experience sustained growth revenues driven by increased demand for connectivity as people continued to work from home during the lockdown, especially in SA.
"I see no reason for them to struggle," he said.
Shares in Vodacom closed 1.7% lower at R126, having risen 9.8% so far in 2020.
With Karl Gernetzky
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