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Vodacom's capital investment to rise by up to 17%

Telecommunications group Vodacom will increase its capital investment by between 14% and 17% of revenue to develop its network capacity and data coverage‚ it said on Monday, 11 November.
Vodacom says it will increase its investment in capital expansion by up to 17%. Image:
Vodacom says it will increase its investment in capital expansion by up to 17%. Image: Sky Scraper City

However‚ it warned that the investment may be revised because of the proposed reduction in mobile termination rates.

In the past few years Vodacom has invested about R7bn a year in SA. For the six months to September‚ Vodacom says it invested slightly more than R3bn locally while its capital investment in its international businesses increased by 74.1% to R1.8bn.

"Our investment concentrated on increasing the reach of our data network and improving network capacity and resilience through self-provided high-speed transmission‚" said chief executive Shameel Joosub.

Vodacom's 3G data network now covers 88.9% of the population up from 83.6% in the prior year.

Joosub said the proposed new mobile termination rates‚ which are expected to come into effect in March next year‚ mean that Vodacom will have to adjust its forecasts, including capital investment and operating expenses. "These new rates will have an impact our price transformation programme," Joosub said.

Consulting with regulator

He said the company was actively participating in the consultation process (with the regulator)‚ with the aim of getting a more reasonable outcome.

The regulator has proposed that the rate drop from 40c to 20c by March next year and to 15c in 2015 and just 10c in 2016.

Joosub warned that the proposed reduction may have a knock-on effect on the business and that drastic measures would have to be taken by the group. He said the company may review its capital investment plan based on final outcome of the lowering of termination rates.

Vodacom intends to invest in new services‚ further enhancing the network and accelerating coverage roll-out. "The proposed acquisition of Neotel will also accelerate these roll-out plans‚" said Joosub.

He said there was an opportunity to recapitalise Neotel properly and then combine the two businesses to grow the fixed-line market more quickly.

Vodacom reported headline earnings per share for the six months to September rose 10.9% to 439c lifted by strong operating profit growth. Operating profit rose 11.5% to R9.9bn and net profit rose from R6,1bn in the first six months of last year to R6.6bn this year.

Local and international growth continues

Revenue was up 6.6% to R36.6bn on strong growth in international operations and improved growth trends in SA.

Vodacom operates in SA‚ Lesotho‚ Mozambique‚ Tanzania and the Democratic Republic of Congo.

Group active customers increased 9.7% to 53.8m‚ with net connections of 949‚000 for SA and 2.3m in international operations where Vodacome has a customer base that has grown 22.4% to 23.7m.

Group data revenue growth of 29% was driven by bundle sales and integrated offers. In SA data revenue increased 20.6% to R5.1bn‚ contributing 21.5%.

"A cornerstone of our strategy is sustained investment in network capacity. With increased capacity‚ we're able to offer better value and support higher usage without impacting on quality‚" said Joosub.

"In SA‚ Vodacom invested R3.1bn in the network during the period and increased 3G coverage to 88.9% of the population," he added.

He said the group would accelerate its capital investment programme with the aim of establishing clear market leadership in the markets in which it operates.

Vodacom declared an interim dividend of 395c.


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