Vodacom's stock lost as much as 5.60% in morning trade today after releasing results that were negatively hampered by mobile termination rates, foreign exchange effects and heavy competition.
The share price lost 745c to trade at around R125.65 just before noon today.
In the six months to September, the group - SA's largest operator - reported revenue marginally up to R37.5 billion, which shows reported growth of 2.3%. However, stripping out foreign exchange movements, Vodacom's top line only gained 1%.
The company's service revenue also came under pressure despite increased data use, as the cost of voice and data continued to decline, and lower termination rates wiped R1 billion off its revenue line. Service revenue was reported at 1.7% higher to R30.7 billion, but without currency movements only gained 0.2%.
CEO Shameel Joosub expects mobile termination rates to cost the company as much as R1.8 billion over the full year, with a net effect of R1 billion. This loss will slow in the second half because of less aggressive rates introduced by regulator, the Independent Communications Authority of SA (ICASA), towards the end of September.
Joosub says the hit will be worse in this financial year than any following years as the biggest effect comes in the first year of the glide path. Mobile termination rates dropped 50% between April and the end of September, covering Vodacom's current reporting period.
After ICASA was sent back to the drawing board by the South Gauteng High Court earlier this year, it released rates that are more favourable to the large players than initially proposed, but still have an element of asymmetry. The regulator decreed mobile termination rates would remain at 20c until next September, after which they would drop to 16c, and then 13c in the final year to September 2017.
Cell C and Telkom Mobile will now be able to charge the duopoly 31c to terminate calls on their networks, which then drops to 24c and then 19c at the end of the glide path. Initially, ICASA mooted rates that favoured smaller players Cell C and Telkom Mobile. From April, mobile termination rates for Vodacom and MTN dropped to 20c - half the previous rate - while Cell C and Telkom Mobile were able to charge the two larger players more than double that (44c) to terminate calls on their network.
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