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VCL sees another drop in subscribers

Business

Staff Reporter

Lesotho’s leading mobile network operator, Vodacom Lesotho (VCL), is experiencing a paradoxical trend: while it continues to lose subscribers in significant numbers, it is simultaneously seeing an increase in revenue and earnings.

According to the Vodacom Group Limited Reviewed Annual Results and Cash Dividend Distribution for the year ending March 31, 2024, VCL’s customer base decreased by approximately 166,000 from 1,711,000 on March 31 last year to 1,545,000 on March 31 this year.

This follows a previous drop from 1,882,000 customers at the end of March 2022.

The financial statements clarify that customers are defined as those using any service in the past three months, including those paying a monthly fee, even if they did not use the service, and those active while roaming.

On a positive note, VCL’s data customers saw a slight increase of 1.1 percent, from 832,000 subscribers on March 31 last year to 841,000 this year.

Data customers are considered active if they generate billable data traffic within the month, including those on integrated tariff plans, corporate APNs, and those allocated a revenue-generating data bundle.

A user is defined as being active if they are paying a contractual monthly fee for the service or have used the service during the reported month.

Despite the overall decrease in customer numbers, VCL’s revenue grew to M1.309 billion for the year ending March 31, 2024, marking an 8.7 percent increase from M1.204 billion in the previous year.

Service revenue also saw a rise of 6.9 percent, from M1.152 billion in 2023 to M1.231 billion in 2024, while earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 7.1 percent, from M421 million in 2023 to M451 million this year.

VCL is part of the Vodacom Group, with the Sekha-Metsi Consortium, a collective of local business people and public figures, holding a 20 percent share.

The remaining shares are held by Vodacom Group, a subsidiary of Vodafone Group Plc, one of the world’s largest communications companies by revenue.

VCL Financial Services, a wholly owned subsidiary licensed by the Central Bank of Lesotho (CBL), operates M-Pesa, a mobile phone-based money transfer service launched in 2013.

M-PESA is Africa’s most successful mobile money service and the region’s largest fintech platform.

According to Vodafone, M-PESA provides more than 51 million customers across seven countries in Africa with a safe, secure, and affordable way to send and receive money, top-up airtime, make bill payments, receive salaries, get short-term loans, and much more.

The financial results show that in Lesotho, active M-Pesa customers fell by about 13.3 percent, from 1,077,000 on March 31 last year to 930,000 on March 31 this year.

Despite this drop, financial services revenue increased from M167 million in 2023 to M193 million in 2024.

While the results do not specifically explain why VCL customers declined, the decrease may be linked to the Communications (Subscriber Identity Module Registration) Regulations of 2021.

Published in a Government Gazette on December 24, 2021, and effective from June 24, 2022, these regulations mandated VCL and its sole competitor, Econet Telecom Lesotho (ETL), to register SIM cards to enhance national security and curb criminal activities.

The initial registration deadline was set for June 23, 2023.

However, a public outcry emerged a few weeks before the deadline, raising concerns about the accuracy of the data being captured. In response, the Lesotho Communications Authority (LCA) decided not to deactivate all unregistered SIM cards immediately, opting instead to clean the data.

By November last year, the LCA announced that the data cleaning process was complete and confirmed that all registered subscribers were duly captured.

The final registration deadline for all SIM cards was set for January 31, 2024. Following this date, all unregistered SIM cards were deactivated, with those remaining unregistered being deleted from the system on April 30, 2024.

These regulatory changes and their enforcement likely contributed to the reduction in VCL’s customer base, although the increase in data and financial services usage has cushioned the financial impact.

Commenting on the overall Vodacom Group results, the group’s Chief Executive Officer (CEO) Shameel Joosub said: “In a year when we celebrate our 30th anniversary, we also surpassed the 200 million customer mark.”

He highlighted these achievements as particularly gratifying milestones in Vodacom’s history.

“Our customer base is evenly split across our segments, which include South Africa, Egypt, International business, and Safaricom, showcasing the breadth of our footprint, which covers more than half a billion people across the continent. In aggregate, our new services, which include digital and financial, fixed and IoT, reached a contribution of 20.0 percent of Group service revenue, as we also advanced our product,” he added.

Joosub further explained that a combination of start-up losses in Ethiopia, higher finance and energy costs, the impact of absorbing inflationary pressures, and weaker exchange rates across markets, including the recent devaluation of the Egyptian pound, contributed to the 10.8 percent decline in headline earnings of 846 cents per share (CPS).

“Reflective of our dividend policy of paying at least 75 percent of headline earnings, the Board declared a dividend per share of 590 CPS for the year. Nonetheless, we expect that our efforts to diversify the Group’s footprint and product mix will unlock strong returns over the medium term,” Joosub said.

“Despite the economic backdrop, we remain committed to spending 13 percent to 14.5 percent of our overall revenue on capital expenditure that ultimately results in an enhanced customer experience through sustained investments in technology and network infrastructure,” he added.

He emphasised that these investments have and will continue to enhance network resilience through the acceleration of 5G coverage, the rural coverage programme to help bridge the digital divide, and efforts to keep customers connected despite the power challenges across key markets.

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