Vodacom has pumped a record amount of capital into its network in South Africa for the second year running as it seeks to catch up with rival MTN South Africa’s heavy spending in recent years.

The company’s capex for the 2024 financial year, which ended in March, was near the record levels set in 2023. Spending in the year ended 31 March 2024 came in at 11.1-billion, only 0.5% lower than the record high of R11.2-billion in the previous year.

According to the telecommunications operator’s financial results released on Monday, Vodacom at a group level aims to maintain a relatively high capex to revenue ratio of between 13% and 14.5%.

“Despite the economic backdrop, we remain committed to spending 13% to 14.5% of our overall revenue on capital expenditure that ultimately results in an enhanced customer experience through sustained investments in technology and network infrastructure,” group CEO Shameel Joosub said in a call with journalists on Monday.

“This has and will continue to enhance network resilience through the acceleration of 5G coverage, our rural coverage programme to help bridge the digital divide, and keeping customers connected despite grid availability challenges and higher electricity costs.”

Vodacom South Africa’s increased capex intensity in the last few years led to the operator outperforming MTN in independent network quality benchmark tests by Accenture’s Umlaut in July 2023. MTN South Africa has won many other awards for its network in recent years, though. MTN spent R10.1-billion on its network in its 2023 financial year, which ended in December. This means Vodacom outspent its rival by just over R1-billion.

Spectrum

Building resilience against load shedding was a key focus for South African mobile operators in 2023, the worst year for rolling power outages in the country’s 13-year-long battle against a growing energy deficit.

But according to Vodacom, its capex had other focus areas, too. One of these was taking advantage of the availability of “digital dividend” spectrum, which Vodacom acquired in the 2022 spectrum auction.

The spectrum only became available to operators in August 2023, when broadcasters vacated the 700MHz and 800MHz frequency bands. Vodacom settled the final R2.2-billion tranche of its spectrum payments in the 2023 financial year, it said.

“From an infrastructure investment perspective, we spent [capital] to support network resilience, leverage our new spectrum assets, and enhance our IT platforms to maintain our competitive edge and remain South Africa’s most reliable network,” said Joosub.

The benefits of Vodacom’s capex on its network resilience profile are counterbalanced by the effect of this spending on the bottom line. Operating profit in South Africa declined by 3.6% to R20.1-billion. “Higher depreciation and amortisation in South Africa was associated with our investment into energy resilience and new spectrum,” it said.

Despite a touch macroeconomic environment, Vodacom South Africa showed a resilient performance in the past year, driven largely by the operator’s diversified portfolio of services bolstering the flattened output from its traditional core business.

“South Africa service revenue grew 2.6% to R61.6-billion and reflected ongoing macroeconomic challenges. The growth was supported by new services, the consumer contract segment and prepaid mobile data. New services such as financial and digital services, fixed lined and the internet of things were up 11.2% and contributed R10.2-billion or 16.6% to South Africa’s service revenue. – © 2024 NewsCentral Media