Price Cuts Boost Vodacom's Interim Performance - Frost & Sullivan

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Price Cuts Boost Vodacom's Interim Performance - Frost & Sullivan

PR Newswire CAPE TOWN, South Africa, Nov. 12, 2012

- Vodacom release interim results today

CAPE TOWN, South Africa, Nov. 12, 2012 /PRNewswire/ -- Vodacom has shown increased revenues in its South African operations, despite the market becoming increasingly saturated and witnessing more fierce competition. The company also completed the sale of carrier, Gateway Communications to Asian operator, PCCW, follow ing some below-par performances.

The Vodacom Group released interim results for the six months ended30 September 2012, posting impressive revenue and earnings. Compared to the same period last year, revenue was 6.9% up from R27,752 million in 2011 to R29,675 million in 2012. EBITDA for the period increased by 7.6% to R10,535 million. The performance was driven by continued growth in international operations and data services.

Since the turn of the year, Vodacom has been cutting prices, as the price war between the operator and rival, Cell C, has intensified. Despite downward pressure on prices, mobile voice and data revenues rose 7.3% and 20.2%, respectively.

"The pressure to cut prices is changing the rules of the game for mobile operators," says Frost & Sullivan's Information & Communication Technologies research analyst, Lehlohonolo Mokenela. "Operators are being forced to become creative with new tariff structures to ensure price reductions don't start cutting into their margins."

The group's international operations recorded double-digit growth yet again. The combined revenue from the Tanzania, DRC, Mozambique and Lesotho operations rose by 36.5% to R5,992 million. M-Pesa continued to play a key role in the performance of Vodacom Tanzania as subscribers grew to 4.2 million from 2.2 million the year before.

According to Mokenela, Vodacom is becoming increasingly diversified, both geographically and across services. The company continued to grow its financial services subscribers, while the contribution of international operations to group service revenues has risen to 20.1% in the current period from 15.8% in 2011 and 14.8% in 2010.

While the earnings per share (EPS) was up 36%, it w as boosted by the sale of Gateway during the period. However, the Headline Earnings per share (HEPS), which excludes the impact of the transaction on earnings, rose by 22.2% to underline a strong performance in the company's operations.

As the operator will remain a customer of the carrier despite the sale, Mokenela expects to see continued growth for Vodacom business.

Vodacom's drive to expand its infrastructure showed no sign of slowing down, as 438 base stations were added to the existing total base over the period. The operator's Capital Expenditure (CAPEX) for the six months increased to R4,713 million, 36.1% up from the same period in 2011.

With the introduction of Long Term Evolution (4G/LTE) services, Mokenela expects higher CAPEX by the end of the financial period as Vodacom expands its LTE network to other parts of the country.

Vodacom declared an interim dividend of180 centsper share.

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