Vodacom Q3 revenue down after SA lowers connection tariff

By Helen Nyambura-Mwaura

JOHANNESBURG (Reuters) – Lower call connection tariffs and stiff competition reduced Vodacom's third-quarter revenue by 1.1 percent from a year ago to 19.99 billion rand ($1.76 billion), the South African telecoms operator said on Wednesday.

South African regulators last year directed mobile phone companies to lower termination rates, or the amount they charge one another to connect calls onto their networks, saying they were keeping tariffs high and hindering competition.

"There was a significant impact from the 50 percent decline in mobile termination rates in South Africa, increased competition and we're seeing increased pressure on consumer spending," Chief Executive Shameel Joosub said in a statement.

Without the reduction in the connection rates, revenue would have risen 1.5 percent, Vodacom said.

However, the unit of Britain's Vodafone Plc, said it increased its customer base by 9 percent more to 61.1 million users in the three months to end December 2014.

Although Vodacom added new uses, the drop in revenue showed that it was struggling to cope with competition in its key South African market from main rival MTN, one analyst said.

"Management are basically saying that it is a very difficult operating environment out there, there's increased competition and increased pressure on consumer spending," said Reuben Beelders, a portfolio manager at Gryphon Asset Management.

Vodacom's data business would remain the main driver of future growth, Beelders said.

The mobile firm said its data revenue was nearly 20 percent higher at 4.33 billion rand, while users increased by more than 16 percent to 26.5 million.

Vodacom is seeking approval to acquire Neotel, the South African unit of India's Tata, to access its broadband assets as a springboard to expand its data service.

Competitors such as MTN, Telkom and unlisted Cell C have asked regulators to block the deal, saying it would give Vodacom undue advantage over them. They wan tNeotel's spectrum re-allocated to the market.

Shares in Vodacom, which also offers telecommunications services in Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo, took a beating in earlier trade.

The stock fell as much as 3.8 percent but rebounded to trade 1.4 percent down at 0926 GMT. In comparison, those of MTN were up 1 percent.

($1 = 11.3715 rand)

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