Data explosion, who would have thought? Well....we would.

05-FEB-14

This morning we received a quarterly update from Vodacom for the period ended 31 December 2013. The numbers look really impressive. Group revenue increased 10.5% to R20bn. Service revenue increased by 6.4% while data revenue increased 40.7%. Data is now amazingly 22% of all revenues. Who would have thought a few years ago.


They are also growing clients nicely, 12.3% for the quarter with 56 million active customers. International users grew 22% and now comprise 25 million subscribers, fast approaching half. This had always been one of Vodacom's weaknesses, their lack of international diversification.


Of their 31 million customers in South Africa only 7.2 million have smartphones. This number had increased 600 000 in the quarter. For each smartphone on their network, data consumption increased an astonishing 83.5%. Wow, so as smartphones get more sophisticated and efficient, more data is consumed.


A ratio of one smartphone for every 4.3 phones in South Africa is still really low. That has huge potential for growth and as more people adopt smartphones we will see data becoming half of revenues in the near future in my opinion. That is because existing clients are consuming more data at an extremely fast rate while new clients are entering the realm of data consumption also very quickly, off a low base.


What else was interesting was that throughout all these great numbers, prices have been declining. In South Africa they have decreased the prepaid average price per minute by 25.3% and the average MB of data by 16.2%. I have said this before, people absolutely love to communicate. This means that when prices come down they just communicate more and end up paying the same or in fact more. Most of the technology is already installed so it does not have a big impact on company costs when traffic increases.


This mitigates a lot of the risk of both regulations and cannibalism from data. People maybe Whatsapping as opposed to SMSing or talking but the rate of communication is flying and changing our daily lives.


Last week ICASA announced that they are going to further cut MTRs, the mobile termination rate. Basically this is the rate Vodacom charges a Cell-C or Telkom client to call a Vodacom user. This will have a negative impact on sales and Vodacom are challenging the process taken to determine these rates.


I am very encouraged by these numbers for both Vodacom and MTN. These companies are connecting Africa off a low base, even in South Africa as far as data is concerned. We continue to add to both.