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    Chairman's statement Interview with the CEO Interview with the CFO

    Strategic reviews

    Grow passionate promoters by dramatically improving the customer experience Actively create an environment for our people to excel and grow Put the power of the internet in people's hands Together drive operational excellence Proactively partner with our stakeholders
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Interview with the CEO

Interview with the CEO

We’ve taken a good hard look at what we need to do to improve the customer experience. We’ve restructured, refocused, and reorganised to regain the agility and creativity that made us successful. Every single one of us has a common purpose that gets us up in the morning. Together, we’re doing what we need to do to make every customer smile.

Walk us through the year – what were the highlights and what didn’t exactly go to plan? I’ve been with Vodacom since the beginning in the early 1990s and I don’t think we’ve ever had a year quite like this. Operationally and financially I think we’ve got lots to be proud of. Customer numbers increased 9.0% to 43.5 million, data revenue grew a huge 35.5%, and free cash flow was up 22.4%. I’m very pleased with the increase of more than 60% in dividends. This supported total shareholder returns of 51%, the best in the industry. At the same time, we invested R6.3 billion in our networks. In South Africa, we have replaced a third of our old radio equipment and added 577 new base station sites. The cherry on top was delivering on our R500 million cost-efficiency programme. In any normal year, this activity alone would have been more than enough to keep us busy. But we also managed to plan and pull off a massive brand refresh, which touched just about every area of the company. Supporting the brand refresh, we also kicked off wide-ranging internal changes to improve our network, the customer experience and the value we offer. The positives this year far outweighed the negatives, but I would have liked to have seen more progress in finding a solution in DRC and better returns from Vodacom Business Africa, which is a spin-off from the Gateway acquisition. Our mobile money transfer service, Vodacom M-Pesa, while successful in Tanzania, hasn’t yet gained the critical mass that we’re looking for in South Africa, but we’re taking steps to fix this.

Transformation is another area where we need to make serious progress. Vodacom isn’t yet representative enough of the wider society we operate in, so we’ve started a programme at all levels of the business to change this. Each and every department has completed a plan with specific transformation targets, and bonuses are now tied to performance against these plans. This process won’t be done in a year but I do expect to report significant progress by next year.

How do your five strategic priorities tie in with your old four-pillar strategy? Most businesses, Vodacom included, have historically managed stakeholder and sustainability issues separately to what was seen as the core activity – making money and keeping shareholders happy. In fact, we managed to make things more complicated with separate strategies for business, sustainability, risk management and stakeholder engagement. Looking at it now, it clearly seems confusing and over-complicated when all these things are actually interrelated. What good is a sound approach to business if you put stakeholder issues on the backburner and don’t pay enough attention to government or community issues? Can we really continue to create and sustain value if we don’t respond proactively to the longer-term risks threatening society and the environment? Does it really make sense to have a separate annual report and sustainability report if sustainability is fundamental to our business strategy? These were the kind of questions we asked ourselves before deciding to change our approach to strategy and reporting, the end result of which is the report you’re reading now. The starting point of this process was to identify the most important issues across all stakeholder groups. These were then grouped into five strategic priorities.

Our five strategic priorities:

Grow passionate promoters by dramatically improving the customer experience Actively create an environment for our people to excel and grow Put the power of the internet into people’s hands Together drive operational excellence Proactively partner with our stakeholders

see vodacom.com for a CNBC interview with Pieter on the year’s performance.

Surely it’s hard to change if you’re still the same company with the same people?

Implementing real change is tough, which is why the integrated approach to strategy and reporting is only a small step in a much bigger change. Just 17 years ago, Vodacom was starting up. Today we’ve got over 43 million customers. Somewhere along the way we got too bureaucratic and complicated and started losing some of the characteristics that made us successful. With the advent of mobile data, smartphones, tablets, social media and email, the world has changed fundamentally and so has our business. It’s not just about making a call anymore; it’s about providing connectivity that creates possibilities and changes lives. We’re seeing stellar growth in data use and we need to regain that start-up mentality to ride this next wave. Vodacom is full of really good people and we need to let them get on and do their jobs. We’ve started removing the shackles that are stifling our creativity and agility. We’re changing policies and procedures, taking out management layers and cleaning up reporting lines. We’re empowering each and every employee to solve problems for customers, whether they are customer facing or not. Above all, we’re making sure that everything we do is aligned with our values of speed, simplicity and trust. These changes start from the top. We’ve restructured the Executive Committee to include seven functional heads supporting both our South African and International operations. This has cut down on duplication and means I get unfiltered input. In addition to the commercial, operations, finance and technology functions, we’ve added our corporate affairs, strategy, legal and human resources heads to the table. We’ve also recruited an experienced CEO to focus on our International operations and make sure they perform to their potential.

What keeps you awake at night?

The only thing affecting my sleep is all the energy and excitement around the changes we’re making. I also spend a lot of time thinking about how we can use our technology innovatively to support meaningful development in important areas like education and healthcare. This isn’t about philanthropy; it makes good business sense. The future of our business depends on a healthy and well-educated customer base and a growing economy. If the question is what concerns me most, I have to say that access to additional spectrum and the planning issues holding up the expansion of our network are probably top of my list. We’ve also got to do more on the cost savings front to offset at least some of the revenue impact of lower mobile termination rates.

Was it really necessary to change the logo and colour? Why not spend that money on something customers really want?

There’s absolutely no doubt in my mind that refreshing our brand identity was the right call. In 2011 Vodafone was ranked most valuable global telecoms brand and fifth most valuable brand in the world according to Brand Finance plc. We can now capitalise on this brand strength, besides the other huge advantages that come with the relationship. So whether you’re watching Formula 1, IPL or Super Rugby, the familiar logo will remind you we’re very much part of a global family. But the reasons for the change run deeper than this. We also needed to signal to our customers that the new Vodacom means sweeping changes across our network, customer service and value offering. Likewise, our employees needed a tangible break from the past and a high-impact start to a new way of doing things. It’s already a customary refrain in the office when an old practice is being challenged: “This is the new Vodacom!”. Since we launched the new Vodacom, we’ve rolled out a double-speed 43.2 Mbps network in South Africa, enabling 2 000 base stations by the end of May 2011. We’ve also reduced average effective data prices across the Group by 17.4%. This is just the beginning of what our customers will experience as we go from cool blue to red hot.

Where do you go from here?

We’ll continue to roll out coverage and give everyone possible a decent connection. So we’re increasing our capital expenditure to R7.7 billion over the next year. This will support the roll out of new 3G base stations and high-speed transmission to most of these sites. We’ll also be upgrading more sites to 43.2 Mbps to increase capacity and speed. We also need to put the power of smartphones that are capable of running an ever growing library of applications within everyone’s reach. Thanks to our ties with Vodafone we hope to be able to offer fully functional touchscreen Android smartphones for less than R1 000. By providing connectivity at the right price, we really do believe we can change the lives of our customers.

Watch our 'Vodacom is Red' video