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Vodacom’s operating revenue from South
African operations increased in the 2009
financial year mainly due to an increase in
customers driven by retention campaigns
and loyalty programmes, the introduction
of more affordable products and lower
denomination vouchers. Revenue growth in
the other African operations was mainly
due to strong customer growth driven by
the launch of new products and services,
aggressive sales and marketing campaigns
as well as enhanced network coverage.
Vodacom’s operating revenue increased in
the 2008 financial year primarily due to
increased airtime, data, interconnection
and equipment sales revenue as a result of
continued customer growth. Vodacom’s
equipment sales further increased in the
2008 financial year due to the added
functionality of new phones based on new
technologies.
Our 50% share of Vodacom’s revenue from
operations outside of South Africa increased
to R3,502 million for the year ended
March 31, 2009 from R2,697 million
for the year ended March 31, 2008 and
R2,069 million in the year ended
March 31, 2007. The increase in
Vodacom’s operating revenue from other
African countries in the 2009 and 2008
financial years was primarily due to
substantial increases in the number of
customers in Vodacom’s operations,
particularly in Tanzania, the Democratic
Republic of the Congo and Mozambique,
and the weakening of the rand in the 2009
and 2008 financial years, which resulted in
higher rand converted revenue, partially
offset by lower ARPU resulting from the
higher volume of lower spending prepaid
customers. Revenue from Vodacom’s other
African countries as a percentage of
Vodacom’s total mobile operating revenue
increased to 12.7% in the year ended
March 31, 2009 from 11.2% in the year
ended March 31, 2008 and 10.1% in the
year ended March 31, 2007.
South African contract ARPU decreased to
R474 per month in the 2009 financial year
from R486 per month in the 2008 financial
year and R517 per month in the 2007
financial year. South African prepaid ARPU
increased to R68 per month in the 2009
financial year from R62 per month in the
2008 financial year, a decrease from
R63 per month in the 2007 financial year.
In the 2008 and 2007 financial years,
contract and prepaid customer ARPU were
also negatively impacted by the high
growth in Vodacom’s hybrid contract
product, Family Top Up, which contributed
to the migration of higher spending
prepaid customers, who tend to spend less
than existing contract customers, to
contracts. In the 2007 financial year,
Vodacom changed its definition of active
customers to exclude calls forwarded to
voicemail from the definition of revenue
generating activity for a six-month period,
resulting in the deletion of approximately
three million customers. Prepaid ARPU was
positively impacted by this temporary rule
change in the 2007 financial year.
Vodacom subsequently changed its
definition of revenue generating activity
back to include calls forwarded to
voicemail effective September 1, 2006.
Such SIM cards were disconnected from
the network after being inactive for a
215 consecutive day period. Since
implementing this change, prepaid SIM
cards remaining in an active state on the
network, with only call forwarding to
voicemail and no other revenue generating
activities, increased significantly. Vodacom
therefore implemented a supplementary
disconnection rule in September 2007 to
disconnect inactive prepaid SIM cards
after 13 months of being kept in an active
state, by call forwarding to voicemail only,
and not having had any other revenue
generating activity on Vodacom’s network.
The implementation of the supplementary
disconnection rule led to the disconnection
of an additional 2.9 million prepaid SIM
cards in September 2007, which resulted
in higher prepaid ARPU than would have
otherwise occurred. Approximately 85.3%
of Vodacom’s South African mobile
customers were prepaid customers at
March 31, 2009 and approximately
Telkom Annual Report 2009 123
94.4% of all gross connections were
prepaid customers in the 2009 financial
year. Vodacom expects the number of
prepaid mobile users to continue to grow
to a greater extent than contract mobile
users. The increasing number of prepaid
users, who tend to have lower average
usage, and the lower overall usage as the
lower end of the market is penetrated have
historically resulted in decreasing overall
average revenue per customer. Total South
African ARPU increased to R133 per month
in the 2009 financial year and remained
stable at R128 per month in the 2008 and
2007 financial years. Total South African
ARPU remained stable in the 2008
financial year, despite declining South
African contract and prepaid ARPU, due to
a shift in the customer mix to higher
spending contract customers, which
represented 14.3% of total South African
customers as of March 31, 2009 and
2008, respectively.
Service providers in South Africa generally
subsidise handsets when a contract
customer enters into a new contract or
renews an existing contract depending on
the airtime and tariff plan and type of
handset purchased. Subsidised handset
sales give customers an incentive to switch
operators to obtain new handsets and
have contributed to churn. Handsets for
prepaid customers are not subsidised by
Vodacom as these users have the freedom
of switching operators and contribute to
churn. Vodacom is more vulnerable to
churn than other mobile communications
providers in South Africa since it has the
largest number of customers in South
Africa. To date, mobile number portability
has had no significant impact on churn.
The cost to acquire contract customers in a
highly developed market is high. Vodacom
has therefore implemented upgrade and
retention policies over the last few years
and has striven to maintain a high level of
incentives to service providers in order to
reduce churn. Vodacom’s churn rate for
contract customers in South Africa
increased to 9.9% in the 2009 financial
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