Data Service Market Inquiry

Shameel Joosub

17, 18 and 19 Oct 2018

2

ICT Ecosystem

Invest and ROI

Spectrum

Coverage & Quality

Customer Needs

Price Reduction

UsageGrowth

Appeal to

award spectrum and

complete digital migration

Reduce prices and find

ways to make service

affordable for all

Invest

Connect all

and maintain quality network

Ensuring customer needs are met

Increase customers

using data

Continued commitment to:

Ecosystem | Investment is critical to the mobile sector

3

6.9

8.6 8.7 8.5 8.9

2014 2015 2016 2017 2018

Capital expenditure (R billion)

31520 3211534178

3713141635

2014 2015 2016 2017 2018

Customers (thousand)

125113 112 111

101

2014 2015 2016 2017 2018

Total ARPU (rand per month)

>R40

billion

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

(2018) 20,3m Data Customers

(2018)18,5m Active smart

devices

(2018) 7,3m 4G

customers

4

Ecosystem | Lack of high demand spectrum

Capacity

constraints

stemming from

a lack of high

demand

spectrum

Availability of spectrum affects network coverage and capacity that can be delivered in a cost efficient way

SA is seriously

spectrum

constrained:

particularly larger

operators (Vodacom

and MTN)

Spectrum holdings for Vodafone/Vodacom across

different countries

Spectrum per 100,000 customers

Operators can manage capacity constraints to some extent based on how they set prices: will not further reduce prices if this would cause unacceptable network congestion and reduced QoS.

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Ecosystem | Spectrum

5

The amount of spectrum impacts on network deployment cost and capacity

Sufficient spectrum allows

networks to optimise network

deployment and cost

Insufficient spectrum leads to

suboptimal site densification

that increases cost

Hypothetical Area Covered

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Site

0

10

20

30

40

SA Lesotho Mozambique Tanzania Egypt Ghana DRC

Vodacom/fone Average6

Ecosystem | Coverage & Quality

Networks in South Africa ranks performs well on non-price outcomes

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Source: MyBroadband (Q3) (Mbps)

Average download speeds

27 27 22 19 16

Vodacom SA Operator A Operator B

Operator C Operator D

Estimated population coverage

%

87.2%

93.1%

97.6% 98.2% 98.8%

FY14 FY15 FY16 FY17 FY18

3G

11.6%

34.8%

58.2%75.8% 80.1%

FY14 FY15 FY16 FY17 FY18

4G

SA performing wellDownload speeds – all technologies. Source: Ookla Q3

Mb

ps

99.6% 99.6% 99.6% 99.7%

FY15 FY16 FY17 FY18

2G

7

Ecosystem | Other constraints impacting on the costs of network roll out

Lack of measures

to ensure rapid

deployment

• Access to property i.e. buildings, land, roadways etc. necessary for deploying networks

Addressing rapid deployment challenges will reduce capacity constraints in providing

backhaul/transmission required for both mobile and fixed services

Ineffective

access to ducts

and poles

Traffic forecast for metro and rural sites relative to microwave capacity

• Deployment of fibre networks are time consuming and prohibitively expensive

• Encourage multiple providers to share physical networks (passive facilities), which can be more efficient, especially in low-density areas

• Ducts and poles should be optimally utilised without undue duplication

• Microwave links (currently used in many areas) do not have sufficient capacity or reliability to carry future capacity

Also an issue for the deployment of fixed

broadband data

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Wholesale Open Access

Obligation

• Wholesale Open Access obligation to networks and facilities

• Cost-orientated tariffs for deemed entities

Ecosystem | Uncertainty and over-regulation could have a dampening effect on investment

The adverse

effect of

uncertainty

Uncertainty and over-regulation can have a dampening effect on investment

Latest Bill includes drastic amendments to the sector

Obligations

• Universal Service and Access Obligations to be reviewed every 5 years

Spectrum

• High demand spectrum assigned on open access and non-exclusive basis

• Quantity of spectrum proposed to be assigned to the WOAN

• Licence renewal terms and conditions is not clear

Investment is key to drive down prices

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

9

Ecosystem | These factors can all be remedied

High demand spectrum should be assigned and made

usable as a matter of priority

There needs to be effective duct and pole

access

Measures should be put into place to

ensure rapid deployment

There needs to be greater certainty on

proposed amendments to the ECA

• ICASA should conduct a

market review of facility

access and impose a

remedy requiring

dominant providers to

offer access to such

facilities on regulated

terms

• ICASA should release high

demand spectrum as soon

as possible

• It is important that

sufficient spectrum is

available to the WOAN and

MNOs

• Rights of access should be

established

• Rules to obtain access

should be standardised

• Rental charges should be

reasonable

• Obtaining approval should

be fast and efficient

• Information about

facilities should be

available

• Spectrum should be

assigned to existing

operators with guarantees

about existing licences

• A chapter 10 market

review is required for cost

orientated access

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

2013 2014 2015 2016 2017 2018

Price per MB

10

Ecosystem | Effective price per MB and Data Usage

-31%

-24%-13%

-16%-22%

Effective price per MB

Data traffic

14,884 20,76137,451

61,085

89,661

128,372

184,473

2012 2013 2014 2015 2016 2017 2018

Total data traffic Million MB’s

Vodacom price per MB has fallen YoY

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

CAGR

-21.4%

CAGR

52.1%

1st time users

Experienced

users

Hesitant and unsure

how to use data

• Ad-hoc/infrequent basis

• Small data volumes

• No commitment bundles

Ongoing, consistent

demand with ad-hoc

large data requirement

Certain about data

need – ongoing,

consistent, minimum

Ad-hoc small data

Limited income

• Recurring data bundle at

good rate

• Large volume, short validity

bundles at reduced rate – SW

update, device config., video

• Pay as they use (no bundle /

out of bundle)

• Bundles with low rates

NeedCharacteristic

Social media users • Social media bundles

Ecosystem | Different pricing models for different needsInvest

and ROI

Spectrum

Coverage &

QualityCustomer Needs

Price Reducti

on

Usage Growth

R/MB

DATA

01 BUNDLE SIZE 02 VALIDITY PERIOD

R/MB

03 COMMITMENT

R/MB

Ecosystem | Various options to get best priceInvest

and ROI

Spectrum

Coverage &

QualityCustomer Needs

Price Reducti

on

Usage Growth

1 GB plus 1 GB

(night owl)

13

Ecosystem | Different prices for different validity

30 Days

R149

14 Days

R99

7 Days

R79

1 Day

R29

1 Hour

R12

R0,15 R0,10 R0,08

Price/

Inclusive MB R0,03

1GBR per inclusive MB 30 Days

14 Days

7 Days 1 Hour

R per bundle

Price per

bundle

1GB

1 Day

14 Days

R0,08 R0,03 R0,01

R0,08

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

>80% of prepaid subscribers buy hourly, daily & weekly bundles

14

Different Needs | Data bundles

Se

p-1

7

Oc

t-17

No

v-17

De

c-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Hourly Daily Weekly Monthly

Se

p-1

7

Oc

t-17

No

v-17

De

c-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Hourly Daily Weekly Fortnightly Monthly

>25% of contract subscribers buy hourly, daily & weekly bundles

Invest and ROI

Spectrum

Coverage & Quality

Customer Needs

Price Reductio

n

Usage Growth

15

Ecosystem | Buy and Stay in bundle

82 184 342 495 766

31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18

Data bundles sold

% of data customers purchasing bundles

42% 43%

53%

61%

Bundles sold

+44%Million

• Encouraging customers to purchase

bundles

• Smart notifications to help customers

stay in bundle

• Easy viewing of data balances and

purchase of bundles

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Ecosystem | Offers adjusted around customer needs

16

Customer select a device

Customer chooses plan

Buy bundles as required

Enjoy Free services

Sign up for a deal

Vodacom makes it

easy for customers

to acquire a device

by subsidising and

providing various

payment options

Vodacom provide a

number of Postpaid,

Hybrid and Prepaid

plans to choose

from

Vodacom assist

customers to

choose the ‘best fit’

plan

A customer can

select from a variety

of open market

bundles to

supplement their

plan in line with

their current needs

They are offered

Just4U bundles in

line with their usage

profile

Vodacom offers

Customer access to

jobs, education and

health content at no

charge

Offers customers

free data for the

initial set-up of their

phones

Vodacom provide

customers with the

choice of deal with or

without a device

Ecosystem | Reduce digital divide | Smartphone penetration

17

Smartphone entry prices and volumes

2014 2018

R599

R399

Rand dollar exchange rate – 2014-2018

-33%

+50%

In spite of the

rand weakness

the industry

worked hard to

reduce the 3G

entry price

point

Dollar cost of entry smartphones

Rand Dollar exchange rate

Duties

Channel remuneration

VAT

28-30 US dollars

14,5 / 15

10%

15%

15% Street price with no subsidy

R599

Street price with subsidy R399/449

Operators are

heavily

investing to

accelerate

smartphone

penetration in

the entry

segment

-R150/200

gap

Entry

street

price

* GFK estimate

x

+

+

+

=

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Insert Confidentiality Level in slide footer 18

Invest and ROI

Spectrum

Coverage & Qualit

yCusto

mer Needs

Price Reduc

tion

Usage Growt

h

Siyakha Turns 1 #SiyakhaBirthday

Siyakha has connected 7.5 million people through

technology, helping improve the lives of those that can

least afford communication services.

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

Mum & Baby touched over 1 MILLION lives

We've touched over 1 000 000 lives!

Just a year ago, Mum & Baby was a little baby. But now the service has grown

to over 1 million subscribers! Mum & Baby from Vodacom Siyakha has

reached an incredible milestone made possible by you.

Invest and ROI

Spectrum

Coverage &

Quality

Customer

Needs

Price Reduct

ion

Usage Growt

h

21

Commitment | Appeal

Invest and ROI

Spectrum

Coverage & Quality

Customer Needs

Price Reduction

UsageGrowth

Appeal to

award spectrum and

complete digital migration

Reduce prices and find

ways to make service

affordable for all

Invest

Connect all

and maintain quality

network

Ensuring customer needs are met

Continued commitment to:

Increase customers

using data

Thank You