Stock drops as Vodacom’s performance disappoints

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060213 Vodacom quarter three trading update published this morning.Vodacom head office in Midrand.photo by Simphiwe Mbokazi

Asha Speckman

VODACOM’S third-quarter trading performance, which was published yesterday, disappointed shareholders and sent the stock into freefall to lose more than 5.6 percent in intraday trading on the JSE.

The weaker-than-usual consumer spend over what has traditionally been a busy three months to December, competition pressures and regulatory interventions, and foreign currency fluctuations dragged on the performance.

However, analysts said the results were a reflection of a turning point for the South African telecoms sector.

Unlike rival MTN’s reach of 22 markets, Vodacom’s restraint from large-scale expansion years ago was now adding to its growth challenges.

“Going forward it’s going to be difficult. They’ve got to make sure they grow data and get it right – better than the other guys,” Farai Mapfinya, a portfolio manager at Mvunonala Asset Managers, said.

During the three months to December, group data revenue grew 23.3 percent and group data customers increased by 33.8 percent to 18.5 million, as smartphone penetration and data bundle sales increased.

In South Africa, where Vodacom derives more than 80 percent of its revenues, data revenue rose 17.2 percent to R2.3 billion and contributed 18 percent to service revenue, compared with 15 percent a year ago.

Data traffic grew 29.8 percent, which more than offset a 13.5 percent cut in its average effective price per megabit.

International operations reported a 100 percent growth to R306 million in data revenue, which contributed 11 percent to service revenue, compared with 5.3 percent for the same period previously.

In contrast, service revenue in South Africa declined by 1.7 percent to R12.5bn “due to competitive and economic pressures (and) temporary impact from our actions to reduce unprofitable calling card SIMs”, Vodacom said.

Mapfinya said declining telecoms prices and over-the-top services that relied on data, such as the WhatsApp message service, would continue to erode growth in voice revenue.

Richard Hurst, a senior analyst at Ovum’s enterprise team, said: “It is an indication of the real sophistication that is creeping into the market. All of them [operators] have realised that this is coming down the road and that’s why they are pushing their data plans.”

Shameel Joosub, Vodacom chief executive, said while active customers increased, “voice revenue in South Africa was impacted by competition in a softer economy”.

Abri du Plessis, an economist and chief executive of Gryphon Asset Management, said consumers were pressured and cellphones were considered a luxury spend.

Shares closed 4.24 percent lower at R116.20 yesterday. page 18