Vodacom South Africa’s revenue declines due to removal of inactive prepaid SIM cards

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Vodacom’s share price reduced by as much as 8 percent after reporting a decline in revenue in South Africa, where it has cut off 337,000 inactive prepaid SIM cards.

The telecoms company, which is South Africa’s largest mobile operator said the ‘one-off’ prepaid customers and a tighter economy had resulted in a drop in earnings.

After Vodacom reduced its customers by 0.6 percent to 43.8 million, its revenue in South Africa reduced by 0.9 percent to 13.9 billion rand for the three months to end of December 2018. The company said the reduction was done to remove customers that only subscribed to benefit from one-off promotional voice and data offers.

The CEO of Vodacom, Shameel Joosub said “prepaid customer growth was resilient, while efforts to reduce one-off use of SIM cards started to take effect, resulting in lower gross additions in the quarter”.

MD of World Wide Worx, Arthur Goldstuck said the cut in prepaid customers had knocked revenue, but the results were also affected by a change in consumer behaviour. This could be seen in consumers reducing their out-of-bundle data usage for the first time. This was an indication that South Africans are making an effort to spend less.

Joosub noted that “contract customer service revenue was down 2.7 percent, impacted by reduced out-of-bundle data spend, as well as customers continuing to migrate to more inclusive value contracts as part of our pricing transformation strategy”.

Subscriber growth in other countries helped total Vodacom subscriber numbers grow by 0.25 percent to 79 million, when measured against the previous quarter. This had boosted its international operations (Tanzania, Mozambique, DRC and Lesotho) where revenue grew 8.8 percent to 5.31billion rand, boosted by sustained data revenue growth (25.4 percent) and growth of its money transfer platform M-Pesa (30.3 percent).

Vodacom has also grown its streaming video platform Videoplay to more than 700,000 subscribers and made progress with its Internet of Things operation, which saw a 24 percent rise to 4.3 million connected devices to its network.

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