| Over the past year we expanded coverage and increased network capacity, rolled out new products and services to the benefit of all customer groups, and at the same time managed to reduce prices and offer greater value. |
A reporting revolution |
| You are reading our first integrated report. It has been produced according to King III’s reporting recommendations and represents a revolution in corporate reporting. I say this because it is the end result of a fundamental shift in Vodacom’s strategic process. Stakeholder concerns and sustainability issues now inform and guide management’s decisions and actions, rather than being seen as somehow separate to doing business and delivering returns to shareholders. |
Strategy and operational performance |
| While the process of integrated reporting evolves at Vodacom, it is appropriate that the Company’s performance for the 12 months to March 2011 is measured according to the strategic focus areas outlined in last year’s annual report. Overall performance was strong, with headline earnings per share increasing 28.6% to 656 cents and dividends growing 61.4% to 460 cents per share. Buoyed by improved economic growth and consumer confidence, the Group made good progress in growing the core mobile business. Total mobile customers were up 9.0% to 43.5 million. The South African business, which makes up 95.4% of Group EBITDA, performed well with service revenue up 4.7%. Through targeted promotions such as Night Shift (free calls from 12am to 5am) and the R29 recharge voucher, we reduced the effective price per minute in South Africa by 11.3%. The Group also delivered strong growth in mobile data. Revenue for this segment rose 35.5% despite the effective price per MB decreasing 17.4%. The number of customers using data increased 39.4% to 10.2 million. Vodacom’s international strategy has two legs. These are to improve the performance of existing operations and to investigate sub-Saharan expansion opportunities. The steps taken to improve returns, which included the appointment of Johan Dennelind as CEO for the International operations, were largely successful with growth resuming. Limited progress was made in resolving the shareholder issues in DRC. Although we examined a number of opportunities for expansion, none met the Group’s investment criteria. |
Meaningful contribution |
| In the mid-1990s, Vodacom partnered with the South African Government to deliver access to telecommunications to as many people as possible. Thanks to the foresight of Government and the dedication of Vodacom employees, this partnership proved very successful with more than 100% mobile SIM penetration achieved this year in South Africa. We are now at similar crossroads with data. Access to connectivity has the potential to transform education and healthcare, and accelerate economic growth and job creation. By investing in our networks to widen data coverage and introducing low-cost internet capable handsets and revolutionary devices like the Vodafone WebBox (which brings the internet to any television), Vodacom is realising the potential of mobile connectivity. However, as the experience of the mid-1990s taught us, co-operating deeply with governments and tailoring our activities to support national development goals can take our contribution to an even higher level. The other side of this is to communicate openly with governments about the factors that restrict our ability to deliver on the promise of mobile connectivity. Foremost among these are access to sufficient spectrum and processes that slow the installation of new base stations. |
Introspection and rejuvenation |
| By the time this report is published, Vodacom will have completed one of the most momentous changes in its 17-year history. The familiar blue and green logo has been replaced with new, but also familiar, red branding adopted from Vodafone. There are obvious benefits to aligning our branding and leveraging Vodafone’s global presence, but for Vodacom the benefits and changes run much deeper than simply changing colour. During the year the Board and management closely examined how we operate and how we want to operate. For the Board, this meant bringing in an outside expert to review our effectiveness and the performance of individual members. The review found that certain issues, such as succession planning, need more attention. On this score we have changed our approach to make sure a more robust process is in place. We also completed a thorough review of our compliance with King III. One outcome was to create a Social and Ethics Committee tasked with monitoring sustainability progress. In addition we developed a new code of conduct, aligned to Vodafone, which sets out our business principles and provides practical guidelines for employees. The management team took on an even more ambitious transformation programme during the year, which examined organisational culture and identified barriers to performance. They then mapped out a process to take the Group from its current makeup to one that more truly represents wider society, especially in South Africa. The Group’s Executive Committee has also been restructured. It now has seven functional heads serving both the South African and International operations. This change reflects the wider process throughout the Company to simplify reporting lines, remove unnecessary layers and create clear accountability. The brand alignment with Vodafone also highlights the value of this relationship for Vodacom. The benefits include sharing ideas and best practice, gaining purchasing leverage, promoting employee mobility, benchmarking against our global peers and making sure that we retain our lead in technology. |
Due credit |
| It takes a special organisation to reinvent itself while retaining the energy and drive that made it successful in the first place. The credit for this belongs in large part to the management team. It is therefore with some sadness that we say goodbye to Shameel Joosub. Shameel’s promotion to CEO of Vodafone Spain demonstrates how our ties with Vodafone open up new possibilities. We’ll watch his progress with pride. In addition to thanking Pieter Uys and his team for piloting Vodacom through a time of great change, I’d also like to thank my colleagues on the Board for their guidance and support. This year we said goodbye to Phuti Malabie and Richard Snow, and welcomed Albertinah Kekana and Nick Read. |
Looking forward |
| Mobile communication has given way to a new era of mobile connectivity. This has the potential to power a new wave of development everywhere we operate. It’s entirely fitting that in the face of the mobile revolution we have fundamentally shifted the way we do business and how we report to our stakeholders. Over the next year, Vodacom will focus on delivering against the five strategic priorities set out in this integrated report and by doing this will make sure the change to red is anything but cosmetic. I am confident that, thanks to the changes set in motion this year, we will demonstrate to the people who keep us in business – from customers and employees to legislators and communities – that their goals and aspirations are indeed fully aligned with those of our shareholders. |
