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| Operational review |
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| Vodacom South Africa |
| Vodacom South Africa continues to grow and the number
of customers have increased to 23.0 million (2006:
19.2 million). A record number of over 10 million gross new
connections is proof of continued activity in the market. |
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| Vodacom's change in South African prepaid customer base |
Vodacom's South Africa operations define active customers
as customers with a SIM card that have revenue generating
activity in the three months leading up to the reporting date.
Up to June 15, 2006, calls forwarded to voicemail were regarded as revenue generating activity and such SIM cards
were classified as active customers. An analysis of the
customer base, based on a statistical sampling, has
revealed that a large number of SIM cards have calls
forwarded to voicemail as their only revenue generating
activity. The majority of such messages are never retrieved
by the customer.
Vodacom changed its definition of active customers to
exclude calls forwarded to voicemail from the definition of
revenue activity effective June 15, 2006. Vodacom
subsequently changed its definition of revenue generating
activity back to include calls forwarded to voicemail
effective September 1, 2006. Such SIM cards would be
disconnected from the network after being inactive for a
215 consecutive day period in accordance with Vodacom
South Africa's current disconnection policy. The retrieval of
a voice mail message by a customer is classified as a
revenue generating activity.
Vodacom deleted approximately 3 million customers during
the period of this rule change. As a result of the rule change,
prepaid churn rates and ARPU increased during the 2007
financial year.
Although Vodacom South Africa continues to expand,
Telkom has started to look for growth opportunities outside
its traditional cellular business. To this effect Telkom has
invested in related industries such as information technology
and broadcasting technology that can for example deliver
22 television channels to Vodafone live! customers.
Customer retention remains a strong focus and Telkom has
introduced loyalty programmes like Vodacom talking points
and the Vodacom credit card to assist with this effort. The
reduction in data tariffs will also contribute significantly to
the total product portfolio Vodacom is committed to provide
to its customers.
Mobile number portability has not had a big impact on the
market, with less than 1% (net donor of just over 6 thousand)
Vodacom customers utilising this facility. The regulatory
environment is an important factor in the performance of all
companies and Telkom anticipates that, when it comes into
effect, customer registration will have an impact on
Vodacom as well as other operators. The regulator has
launched an investigation into mobile and retail wholesale
tariffs which could also have an impact on prices in future. |
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| Vodacom South Africa key indicators |
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Year ended March 31, |
2006/ |
2007/ |
|
2005 |
2006 |
2007 |
2005 |
2006 |
|
|
|
|
% |
% |
| |
|
|
|
change |
change |
| Customers (thousands)1 |
12,838 |
19,162 |
23,004 |
49.3 |
20.1 |
| Contract |
1,872 |
2,362 |
3,013 |
26.2 |
27.6 |
| Prepaid |
10,941 |
16,770 |
19,896 |
53.3 |
18.6 |
| Community services |
25 |
30 |
95 |
20.0 |
216.7 |
| Gross connections (thousands)2 |
6,180 |
9,140 |
10,859 |
47.9 |
18.8 |
| Contract |
434 |
506 |
666 |
16.6 |
31.6 |
| Prepaid |
5,742 |
8,618 |
10,124 |
50.1 |
17.5 |
| Community services |
4 |
16 |
69 |
300.0 |
331.3 |
| Total inactive mobile customers (%)3 |
7.9 |
8.7 |
10.7 |
10.1 |
23.0 |
| Contract |
1.5 |
2.4 |
3.1 |
60.0 |
29.2 |
| Prepaid |
9.0 |
9.6 |
11.8 |
6.7 |
22.9 |
| Total churn (%)4 |
27.1 |
17.7 |
33.8 |
(34.7) |
91.0 |
| Contract |
9.1 |
10.0 |
9.7 |
9.9 |
(3.0) |
| Prepaid |
30.3 |
18.8 |
37.5 |
(38.0) |
99.5 |
| Traffic (millions of minutes)5 |
14,218 |
17,066 |
20,383 |
20.0 |
19.4 |
| Outgoing |
9,231 |
11,354 |
13,638 |
23.0 |
20.1 |
| Incoming |
4,987 |
5,712 |
6,745 |
14.5 |
18.1 |
| ARPU (ZAR per month)6 |
163 |
139 |
125 |
(14.7) |
(10.1) |
| Contract |
624 |
572 |
517 |
(8.3) |
(9.6) |
| Prepaid |
78 |
69 |
63 |
(11.5) |
(8.7) |
| Community services |
2,321 |
1,796 |
902 |
(22.6) |
(49.8) |
| Minutes of use per month7 |
84 |
74 |
69 |
(11.9) |
(6.8) |
| Contract |
226 |
206 |
188 |
(8.8) |
(8.7) |
| Prepaid |
52 |
49 |
47 |
(5.8) |
(4.1) |
| Community services |
3,185 |
2,327 |
1,151 |
(26.9) |
(50.5) |
| Number of employees8 |
3,919 |
4,305 |
4,727 |
9.8 |
9.8 |
| Customers per employee8 |
3,276 |
4,451 |
4,867 |
35.9 |
9.3 |
| Mobile penetration (%)9 |
49.5 |
70.6 |
84.2 |
42.6 |
19.3 |
| Mobile market share (%)9 |
56 |
58 |
58 |
3.6 |
– |
| 1 |
Customer totals are based on the total number of customers registered on Vodacom's network, which have not been disconnected, including inactive customers, as of the end of the period
indicated. |
| 2 |
Gross connections have been restated in the 2006 and 2005 financial years due to a change in Vodacom's reporting policy. Conversions between categories have now been excluded from
gross connections. Based on the previous policy, contract connections would have been 610 thousand in the 2005 financial year and 702 thousand in the 2006 financial year and prepaid
connections would have been 5,566 thousand in the 2005 financial year and 8,422 thousand in the 2006 financial year. |
| 3 |
Vodacom's inactive customers are defined as all customers registered on Vodacom's network for which no revenue generating activity has been recorded for a period of three consecutive
months. In the 2005 financial year, a software error was identified in the calculation of inactive customers. Vodacom has corrected inactive customers as of March 31, 2005. Up to June
15, 2006, calls forwarded to voicemail were regarded as revenue generating activity and such SIM cards were classified as active customers. Because a large number of SIM cards have
calls forwarded to voicemail as their only revenue generating activity and a majority of such messages are never retrieved by the customer, resulting in estimated ARPUs of less than R1 per
month, Vodacom changed its definition of active customers to exclude calls forwarded to voicemail from the definition of revenue generating activity effective June 15, 2006. Vodacom
subsequently changed its definition of revenue generating activity back to include calls forwarded to voicemail effective September 1, 2006. Vodacom deleted approximately 3 million
customers during the period of this rule change. As a result of the rule change, prepaid churn rates and ARPUs increased during the 2007 financial year. |
| 4 |
Churn is calculated by dividing the average monthly number of disconnections during the period by the average monthly total reported customer base during the period. Prepaid customers
in South Africa are disconnected from its network if they record no revenue generating activity with a period of 215 consecutive days. Contract customers are disconnected when they
terminate their contract, or their service is disconnected due to non-payment. |
| 5 |
Vodacom's traffic comprises total traffic registered on Vodacom's network, including bundled minutes, outgoing international roaming calls and calls to free services, but excluding national
roaming and incoming international roaming calls. Vodacom changed the calculation of traffic in the 2006 financial year to exclude packet switch data traffic. Traffic has been recalculated
for the 2005 financial year. |
| 6 |
ARPU is calculated by dividing the average monthly revenue during the period by the average monthly total reported customer base during the period. ARPU excludes revenue from equipment
sales, other sales and services and revenue from national and international users roaming on Vodacom's networks. |
| 7 |
Vodacom changed the calculation of traffic in the 2006 financial year to exclude packet switch data traffic. Traffic has been recalculated for the 2005 financial year. Vodacom's average MOU
is calculated by dividing the average monthly minutes during the period by the average monthly total reported customer base during the period. MOU excludes calls to free services, bundled
minutes and data minutes. |
| 8 |
Headcount excludes outsourced employees. Employees seconded to other African countries are included in the number of employees of other African countries and excluded from Vodacom
South Africa's number of employees. |
| 9 |
Mobile penetration and market share calculations are Vodacom estimates. |
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