- Vodacom continues to see huge growth in data usage, with its latest figures showing an average of 1.1GB per device per month in SA.
- But between “pricing transformation” and customers figuring out its promotions, the money it is making from data is stable.
- Vodacom’s share price dropped sharply on the news.
South Africans are getting good at figuring out how to keep their data costs down, Vodacom said on Thursday. So good that it is starting to hurt revenues, and leaving investors worried.
In an update to shareholders about its trading during the last three months of 2018, Vodacom said it had made roughly the same amount of money from data in SA even as it sold some 40% more of it. That was, in part, expected; Vodacom is in the middle of implementing what it calls a “pricing transformation strategy”.
But the bite was deeper than both the company and its shareholders had expected.
Cutting data prices “did not yield the expected elasticity given a tougher than anticipated consumer spending environment”, Vodacom said.
Translation: people short of money worked the system and didn’t buy as much extra data as Vodacom had hoped.
In South Africa, the average “smart device” on Vodacom’s network (including smartphones, tablets, and dongles for PCs) used 1.1GB of data per month in the last quarter of 2018. That is an increase of nearly a third, Vodacom said. Meanwhile its number of 4G customers jumped by slightly over 40%, and overall data traffic was up 41.4%.
But its revenue earned from data was flat year-on-year, “impacted by customers optimising promotional data”, Vodacom said, including what it described as “generous promotions” such as SummerGigs.
The effect of smarter spending was particularly notable among South African contract customers, where service revenues were down 2.7%. Some of its contract customers had migrated to better packages, Vodacom said, but they were also spending a lot less on out-of-bundle data, which is notorious for outrageously high prices.
Vodacom’s share price dropped by more than 7% in morning trade on Thursday as investors digested the implications of falling revenue in what remains Vodacom’s most important market.
But in the longer run the prospects for its data revenues are good, Vodacom said, especially as more 4G spectrum is made available for use.
Main image credit: Business Insider.