Did you catch that game recently between the Vodacom Cheetahs and the Vodacom Bulls at Vodacom Park in the Vodacom Super 14?
Perhaps not surprisingly, Vodacom, SA’s largest cellphone group, has decided that it sponsors perhaps a little bit too much sport.
CEO Pieter Uys has announced that the group will cut its investment in events like the Super 14 as it seeks to reduce costs as margin pressures, particularly from the upcoming sharp reductions in wholesale mobile call termination rates, begin to bite into its SA business.
And rugby and soccer look set to be the big losers.
Vodacom won’t disclose how much it spends each year on sports sponsorship. All it will say is that it is “significant”.
What it will disclose, however, is the large number of teams and events to which it provides money.
In rugby, it sponsors the Bulls, the Cheetahs, the Stormers, the Vodacom Cup, the Tri-Nations, the Super 14, and incoming tours.
It is also involved with the Springboks and sponsors stadiums in Bloemfontein (Vodacom Park), Pretoria (Loftus) and Cape Town (Newlands).
In football, the company sponsors Kaizer Chiefs, Orlando Pirates and Bloemfontein Celtic.
It is also a part sponsor of Bafana Bafana as well as the Vodacom Challenge and the Vodacom League events. And it’s involved in the Premier Soccer League.
The operator won’t say by how much it plans to cut its sponsorship bill, but says it will be done to ensure its overall marketing spend remains in line with expected reductions in revenue flowing from any future cuts in mobile termination rates.
These rates are the interconnection fees the mobile operators charge one another to carry calls onto their networks. They were reduced on 1 March this year following a voluntarily agreement between the operators. Now industry regulator, the Independent Communications Authority of SA (Icasa), with backing from government and members of parliament, wants them cut much further.
Icasa has proposed that the rates be reduced to 40c/minute by July 2012, a significant reduction from the R1,25/minute they were set at in peak times just three months ago. Mobile operators have warned the cuts will have a big impact on their revenues and profit margins.
Because the reduction in termination rates will be phased in over three years, Vodacom says it doesn’t anticipate terminating any of its sponsorship agreements prematurely.
“We would like to announce our decisions to the affected teams at least six months before expiry of agreements to allow them time to source alternative sponsorship,” Vodacom says in response to questions from TechCentral.
It says any decision to terminate sponsorship deals will be based firstly on what the company can afford. After that, it will use the “usual metrics of exposure, fan base size, access to fan base and rights offers”.
Uys says no decisions have been made yet regarding which teams and events it will no longer sponsor.
However, he tells TechCentral that it’s likely that Vodacom will continue to support rugby’s Super 14. “That’s an awesome series,” he says. “And we’ll continue to sponsor at least one of the good [SA rugby] teams.” — Duncan McLeod, TechCentral
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