Vodacom is spending billions on 'SA’s cheapest data network' Rain, while its own data prices continue to plummet

Business Insider SA
  • Vodacom has, and will, spend a total of more than R2.3 billion in capital in terms of its controversial deal with data-network competitor Rain, financial results published on Monday show.
  • Cell C, which was bitterly opposed to Vodacom and Rain's roaming agreement, estimates the deal will make Vodacom R11.5 billion next year.
  • Rain has a claim on being the cheapest data provider in South Africa, and Vodacom's own data prices are still dropping sharply.
  • Visit Business Insider South Africa for more stories.

Vodacom expects to spend another R1.1 billion in capital in terms of a controversial roaming agreement with data-only competitor Rain, its annual financial results published on Monday show – bringing its spending over the last two years to a total of R2.3 billion.

Details of the deal between the two companies are not public, and Vodacom did not disclose many details in its results for the year to the end of March. But what little it did tell investors suggests a huge flow of money – and data – between the two companies.

And Vodacom said the parties "continue to scale up on the roaming agreement".

See also: Vodacom keeps changing the reason it claims to be SA’s best network – and an advertising regulator is getting tired of its games

Its South African ebitda (earnings before interest, tax, depreciation, and amortisation) margin would have been 0.7 percentage points higher were it not for the Rain agreement, Vodacom said. Though small, that margin would have applied to earnings of R27.7 billion.

Competitors complained bitterly about the agreement between Vodacom and Rain, which reportedly includes the smaller operator getting access to Vodacom tower sites to build out its network infrastructure, while Vodacom gets to piggy-back on the valuable radio frequency spectrum assigned to Rain.

In one hearing Cell C said it estimated that access to Rain's spectrum would gain Vodacom a benefit of R11.5 billion by 2020.

In April, Rain claimed the title of South Africa's cheapest provider of data, based on an analysis of 1GB package prices by regulator the Independent Communications Authority of SA (Icasa).

On Monday Vodacom said its "pricing transformation" in its own data prices has now seen the effective price it charges for data drop by 37% between March 2018 and March 2019.

That means its data prices have dropped by more than half – 57% – over the last three years.

See also: Vodacom backtracks after outrage: It will now roll over data for free

Despite the declining prices, Vodacom reported a small drop in the number of data customers it has in South Africa in the last financial year. But that was mostly due to a "clean up" in how it accounts for active (as opposed to inactive) customers, the company said, and it believed there is still a great deal of scope for profitable growth in selling data in SA. 

Watch Vodacom CEO Shameel Joosub discuss data prices, and the Rain deal, with Bruce Whitfield:

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