Vodacom Service Provider Company continues to distribute products through four distribution channels; Vodacom National Chains, Vodacom Dealers and Franchisees, Vodacom Corporate Solutions and Vodacom Direct.
Vodacom possesses 40% of Africa's telephones, South Africa remains the telecommunications leader on the continent. Vodacom alone handles 10% of Africa's telephone traffic volumes. Vodacom's network ventured outside South Africa and was awarded a GSM license in Lesotho, Tanzania and Angola. Joint ventures and Telecommunications Corporations were set up in all the above mentioned countries to build and operate a network, during the process Vodacom experienced some economic obligations which it had to address such as the interest rates operating in those countries, plus the costs of purchasing the licenses to operate in those regions
The biggest challenge faced is that it had an economy where majority of the population of people are living on the breadline or below it and 20 per cent are middle income or very rich, and that 20 per cent of the market is almost saturated and the opportunities are in the other 80 per cent. The problem is that in this segment incomes are very low. The company could venture in those regions, we can go in and get the subscribers but would be detriment over the company's margins. The challenge is to find products and services that will stimulate usage growth in that 80 per cent of the economy and at the same time do that in such a way that the business continues to grow at levels the company has grown accustomed to.
Another country that has a challenging economy is Nigeria; Vodacom conducted a comprehensive risk profile and tried to come up with a mitigating plan. But decided that for now it would take a back seat and just observe because of the uncertainty of the political situation, corruption and the uncertainty of the security of the people we would send there to look after the business. Also, the cost of the license was prohibitive to say the least. Because much as you have the numbers in population, it's almost like in South Africa where the majority of people are very poor, with very little disposable income, and your return on that kind of licence fee is very much spread out into the future. It had a 50/50 chance of either being successful or breaking even, and if it went belly up Vodacom would have gambled the strong balance sheet that it has developed in South Africa.
Vodacom spotted significant opportunities that will generate vast revenue in these countries but due to the economic factors it's anticipating it might not even meet it's long term objectives and it's profit margins.
Another factor would be it's shareholders(Vodafone, Telkom) that have stakes in those regions wouldn't approve of Vodacom competing with companies it's shareholders have stakes in, as it will result to loss to them as they require a substantial amount of dividends.
Shareholder returns remain a key focus area of Vodacom and our economic prospects and growth opportunities, as proven by our outstanding interim results, continue to attract increased foreign direct investment.
For the past six months, ended 30 September, Vodacom's revenue increased by 22.3% to R16.2 billion, which has translated into a 66.7% increase in profit from operations to R4.2 billion and an increase of 50.4% in profit before tax to R3.8 billion.
The exceptional increase of 66.7% (50.1% excluding the Mozambique impairment and reversal) in profit from operations is due to revenue growing by 22.3% and the operating expenditure only growing by 11.7%," says Knott-Craig.
Earnings before interest, taxation, depreciation, amortisation and impairments (EBITDA) increased 32.8% to R5.6 billion and the EBITDA margin increased to 34.4%. Cash generated from operations is up 27.9% to R4.9 billion.
Social, Cultural, Demographic And Environmental Forces
Vodacom has spend more than 300 million in increasing network capacity and coverage and enhancing the quality of it's network, creating adequate capacity for almost three million subscribers. This investment comes on the heels of a 300 million capital expense in Vodacom network during the previous financial year, and will bring the total capital expense invested in the network to 9 billion since Vodacom started operations. This investment represents the largest private sector capital expense project this decade, this massive investment has two objectives:
Firstly, to ensure the best cellular service for Vodacom's existing two million subscribers.
Secondly, to ensure adequate capacity for the constant growth in new subscribers.
Another growth strategy for Vodacom, was to start taking position for a fresh growth strategy, midway through the year, Vodacom had started building its Intelligent Network (IN) platform, which would open up a new world of opportunities.
The IN platform would pave the way for a number of new products which would attract new groups of consumers to cellphones. Enabled by the new platform, Vodacom's four new bundled tariff packages entered the market. These were designed to be user-friendly, were aimed at specific user groups and followed thorough research into the market and call patterns.
In the normal course of business Vodacom engages with important stakeholders in the marketplace including our customers, business partners, regulatory bodies (ICASA and the Competition Commission) and industry bodies such as the Wireless Application Service Providers Association (“WASPA”). Nurturing these relationships, not only through the quality of our products and services, but also the integrity with which we conduct our business in the marketplace, will be significant towards attaining loyalty to sustain Vodacom's growth in the long-run. Response from our stakeholders suggests that while Vodacom enjoys a strong reputation among the South African public, there is scope to further improve our relationships with our business partners.
Customers; through it's Customer Lifecycle Management programme, Vodacom interacts with customers to provide information, assess needs and measure satisfaction with our service. It also conducts customer focus groups, surveys, as well as monthly in-house and independent customer surveys. Vodacom's call centres receive approximately four million calls a month, of which 73% are answered within 20 seconds. 81% of all calls are resolved in the first interaction. Approximately 25 000 emails are received per month, of which 80% are responded to within 11 hours.
Political, Government, And Legal Forces
Governments and regulators, the entire Group's operating companies have dedicated resources responsible for interaction with governments at national, local and regional level. Vodacom is proactive in engaging with regulators.
The government's intention to implement RICA which requires operators to register customers prior to giving them access to their networks, as well as similar legislation in our other African markets, has major implications for the telecoms industry. Vodacom has been an active participant in the industry-wide RICA process and in most cases has led the initiatives around the registration process. Vodacom has awaited confirmation from government on when the Act will be implemented.
While mobile phones have brought revolutionary benefits to society, adult or inappropriate content can be accessed through various channels such as SMS, MMS, USSD and the internet. The introduction of Location Based Services (“LBS”) has added to the risk of abuse, particularly by Wireless Application Service Providers (“WASPs”).
Vodacom subscribes to Vodafone standards in our approach to adult content on our portals, with limited content equating to a PG13 rating for films. Various initiatives help to ensure responsible delivery of this content, including access control, warning screens, an ‘opt-out' mechanism and parent's guide to protecting children from harmful content. All WASPs utilising Vodacom's network to provide content services must comply with all applicable laws (including the Films and Publications Act, 1996), the WASPA Code of Conduct and WASPA Advertising Guidelines. Vodacom's Regulatory division participates in all initiatives pertaining to policy and legislative developments relating to the protection of children against inappropriate content.
Other legal implications relating to the government are Vodacom's entry and processes in other countries, complying with the legislation in other countries and adapting to the formalities to continue to generate vast amounts of revenue in it's income statement in all regions.
The Vodacom Experience Centre (VEC) builds on Vodacom's proud history of innovation and leadership in technology. It was established to integrate research and development activities for converged ICT products and services, with specific attention to their application in Africa. The Centre is situated in Techno Park, probably the most focused business engineering centre in South Africa.
The centre is a meeting point where collaboration across disciplines is encouraged and the technological developments that drive our business are showcased. Diverse business teams can experience and interact with future products, keeping our people at the leading edge of research and development trends. They can get a feel for how these products work and how they impact on their area of operation and on our customer base.
The centre is also driving closer collaboration between our vendors, research institutions and internal business units. This secures our earlier involvement in the development phase, providing an opportunity to influence and customise products and services to the specific needs of our customers. Our long-term involvement facilitates earlier planning, quicker commercialisation of products and a coordinated approach that keeps all business units at the forefront of innovation at Vodacom.