Vodacom’s big data shocker

Vodacom has released its trading update
 for the quarter ended 31 December 2018, which showed its first-ever decline in mobile data revenue in South Africa.

This decline in revenue came despite a strong increase in data usage, with data traffic on its network increasing by 41.4%.

More encouraging news was that active smart devices on the Vodacom network increased by 13.3% to 20.2 million, with average usage per smart device increasing by 31.9% to 1.1GB.

With an ever-growing 4G network, Vodacom’s 4G customers increased by 40.5% to 9.2 million.

Considering the continued growth in active smart devices and data usage by these devices, it is curious that its data revenue declined.

Vodacom explains

Vodacom said in its results statement that its data revenue was impacted by customers using data rewards from its Summer campaign to offset their usual spend.

It would, however, be incorrect to assume that Vodacom’s Summer campaign was the sole contributor to the decline in data revenue in South Africa.

A Vodacom spokesperson told MyBroadband that they continue to respond to calls to address the cost to communicate in South Africa, which resulted in a 40% decline in effective data prices over the past three years.

The company significantly increased data bundle sales, which means more customers are using in-bundle data which is more affordable.

“We are managing out-of-bundle spend, with more inclusive value contracts and affordable data bundles with shorter validity periods, both of which are increasing in popularity with customers,” Vodacom said.

In terms of Summer Gigs, Vodacom said it is fair to say that against the tougher consumer backdrop the campaign’s expected elasticity was lower than anticipated.

Alarm bells ringing

Despite the good news for consumers that they are getting more data at lower prices, Vodacom will be under pressure to show data revenue growth in the next quarter.

Data growth has always helped to offset the decline in voice revenue for Vodacom, but this trend has come to an end.

The company will now have to find new ways to make more money from data – and increasing prices is not a viable long-term strategy in an increasingly-competitive market.

The chart below shows the rapid decline of Vodacom’s data revenue growth over the last two years.

Share price decline

Shareholders were quick to punish Vodacom for its poor performance in South Africa, with revenue declining 1.3% and service revenue declining by 0.9%.

Vodacom’s share price was down by over 7.0% after the company released its trading update, as shown by the chart below.

Source: My Broadband