Vodacom knows that to maintain its high levels of profitability, it must move away from a reliance on voice revenues. The network operator is investing heavily in 3G, HSPA and LTE, is promising smarter and more personalised consumer packages, and is gunning for high growth in the fibre-powered enterprise business.
"The network remains the lifeblood of Vodacom," Phil Patel, Vodacom's chief consumer officer, tells Brainstorm.
He says the reality is that two thirds of the population will likely never have access to fixed-line Internet. It's up to major network operators like Vodacom to address that by building high-speed mobile broadband, and pumping more bandwidth 'blood' through the veins of the country.
Patel and his team are backing 3G and its evolved state, long term evolution (LTE), investing heavily in these technologies to optimise the experience for the flood of high-end smartphones and tablets hitting South African shores.
LTE's local d'ebut this year has been severely stunted by insufficient spectrum availability, but Patel says the technology has immense potential - being designed specifically for the mobile Internet. "LTE offers very low latency, speeds faster than DSL, fast refresh rates on Web sites, and a higher throughput on the network," he explains.
His vision of providing high-speed mobile coverage to vast swathes of the country is more than just a pipe dream. The operator has spent almost R30 billion on its South African network in the past five years.
And while 3G and LTE may be the front-end, consumer-facing technologies that Vodacom is backing, Patel says there's just as much work going on at the back-end - as it invests in transmission and systems, as well as the fibre optics that power the network.
Voice will become just another application, probably costing customers very little or be free of charge - and being a pure data bearer is going the same way.
Dobek Pater, Africa Analysis
He says one of the key goals over the coming months and years is enabling software companies to better use Vodacom's network features by opening up sets of APIs (application programming interfaces) to enable services like click-to-call, or click-to-buy, for example.
Beyond voice and data
Vodacom remains a highly profitable entity. From its birth in 1993, it claims to have amassed a staggering 51 million customers across the continent.
And the growth isn't slowing down. Its financial year to end-March saw headline earnings per share up 23%, as total earnings reached R25.3 billion. Much of this recent growth has been stimulated by increased data consumption - its data business grew 22% in this period.
But to stay profitable, Africa Analysis' Dobek Pater says Vodacom needs to look beyond the provision of voice and data services. "Voice will become just another application, probably costing customers very little or free of charge - and being a pure data bearer is going the same way," he predicts.
Pater believes Vodacom will find the next growth curves in areas like upselling new products and services to customers, and intelligently using this large customer base as a draw-card for various content providers and developing revenue-sharing models.
"Vodacom will also move towards becoming more of a holistic communications service provider and will seek revenue share from the provision of various services, such as financial services," he adds.
Patel seems to be steering the consumer business towards these areas. He sees a few killer applications for the new, evolved network: video content, payments and m-commerce.
"Video on our network is critical for the growth of data," he says, adding that Vodacom would like users to be able to stream high-definition video content onto their devices.
Huge opportunities exist in this space. As it becomes more and more apparent that dedicated mobile broadcast technologies like DVB-H will simply never arrive on the mobile handset, broadcasters and content providers may start looking towards cellular as a viable delivery channel.
In the payments environment, Patel sees Vodacom's role in providing secure, always-on platforms for local banks, payment providers and other companies. "We passionately believe we should be enabling other companies to bring their services and their transactions onto our network."
The operator is also expecting big things from its enterprise arm, Vodacom Business, which contributed R8 billion in revenues in the past financial year. At 16% of Vodacom SA's service revenues, its chief officer, Vuyani Jarana, is tasked with ramping this up to 25% in the next five years.
"Enterprises want to access data, any time, anywhere, through any device," he says, adding that Vodacom Business has captured a large chunk of the bigger companies out there - about 1 500 so far - and will now be looking to aggressively target the SME market to fuel further growth.
With four data centres already established, Vodacom Business looks to steal customers from the more traditional data centre and cloud service providers, the pure IT companies. Jarana says Vodacom Business is stronger than these organisations in two key areas.
"When you're an end-to-end provider, you can guarantee the quality of service - you can provide very tight SLAs. We have a 99.995% guarantee," he boasts.
Secondly, he points to Vodacom's expertise with end-user access to that hosted data - the mobility aspect. "Cloud and hosting addresses one aspect, but how that information is accessed is crucial - it's about ensuring services are rendered to any device in a seamless way."
Jarana believes the acceleration of hosted PBX and hosted unified communications solutions in particular will become hot topics over the coming years.
It seems hard to argue with these two points. Vodacom Business' onslaught on the traditional data centre and cloud players has been a major cause for concern for many large IT companies.
Negotiating the threats
One major threat where Vodacom appears uncertain with its approach is that of voice over IP and video calling, now made possible from handset to handset with high-speed mobile networks. Patel believes the operator can negotiate this threat with integrated, unlimited, high-quality voice and SMS offerings.
"It all comes down to how you embrace it," he says, adding that the plan will be to migrate higher-end customers to this type of integrated plan. The first iteration of this is the Vodacom Red package. "It's not a sprint, it's a long-term migration."
Vodacom seems well positioned for the future, but perhaps the biggest threat to the operator's careful plans to stay ahead of the game will come in the form of new challengers. Africa Analysis' Pater asks what would it mean if Orange or Bharti buy Cell C, or Internet Solutions buys Neotel? Now there's food for thought.
First published in the September 2013 issue of ITWeb Brainstorm magazine
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