Vodacom declares dividend as consumers fume

Vodacom declares dividend as consumers fume

Vodacom shares are up by 2% after they declared a dividend of 280c per share.

Headlines earnings per share increased 656 cents for the year ended 31st march 2011. Revenue increased to R61.2bn from R58.54bn as group free cash flow grew 22.4% to R8.83bn.

It’s is staggering to imagine the amount of cash this business generates but quite easy to explain. The number of mobile users in South Africa grew exponentially in the past two years while Vodacom’s investment in infrastructure has remained very low as a percentage of expenses. Exactly how much they are spending on infrastructure development and maintenance remains a bit of a mystery as they don’t disclose the exact numbers. So the way that they make these staggering profits is by signing up customers who desperately need cellphones and then they sweat their assets until their networks and infrastructure almost grind to a halt. They invest in as little as possible to squeeze every last cent of profit from the business so that they can make as much profit as possible and earn multi-million rand incentives at the end of the year.

What’s wrong with that?, you ask. What’s wrong is that today it is impossible to drive from Sandton to Johannesburg without dropping a call four times. It’s impossible to get decent data connections in more than 87% of the country. The cost of the phone calls on our mobile networks is exorbitantly expensive and totally out of line internationally. Vodacom is not the only culprit, but the other cellphone companies as well. The shareholders who will receive this generous payout are all very happy. Happy that they have been complicit in one of the greatest mass exploitations of consumers in the history of this country. Vadacom should be taking their ill gotten profits and re investing it into their infrastructure so that we can receive the services that we are paying for, so that our dropped calls can stop and we don’t have to re-dial twenty times a day, and further bolster their coffers, and so that we can use cellular services for what they were intended, to increase productivity. Every time my call drops I can see in my minds eye how Pieter Uys made another R0,0000001. Every time my 3G connection drops I wonder if I would have a decent 3G connection if I lived in the same street as Mr Uys? I suppose he would have a cellphone tower that works near him.

What is it with this corporate culture? Why is it never enough? Why do you have to literally steal from your customers to make billions when you can make hundreds of millions in an honorable way? I am ashamed of the fact that Vodacom is a South African company and I am ashamed of Mr Pieter Uys and his board. I am ashamed of the Vodacom shareholders. I am disgusted by the wholesale rape and pillaging of consumers in South Africa by Vodacom and companies like them.

Vodacom oversubscribed

Vodacom oversubscribed

Business Day reported today that Vodacom is going to reduce the download speed from 3G to 2G for Blackberry users who exceed 100MB per month.

This explains why other Vodacom users have been suffering constant disconnections and slow download speeds. The free data services provided to Blackberry users has created a shortage of bandwidth and Vodacom clearly cannot cope with the demand.

For the past few weeks the 3G service from Vodacom has deteriorated to the point where 3 out of 5 times a decent connection is impossible. It is time that consumers talk with their feet and switch to one of the other service providers. We have been complaining long enough.

It will be interesting to see what will happen if Vodacom is sued for contravening the CPA. It could be a watershed case that will shake up the mobile industry and perhaps hold these fatcat monopolies to account.

Who’s going first?

Development of the ICT sector in SA should be a priority for Treasury

Development of the ICT sector in SA should be a priority for Treasury

Although there are a number of positive elements in the 2011 Budget speech by Mr Pravin Gordhan it is clear that the development of the ICT sector in South Africa is not a priority for the treasury. This is according to Marthinus Strydom, CIO of the McCarthy Motor Group who explains that implementing a proper, workable broadband strategy will unlock SME growth and job creation as well as increase foreign investment in SA.

According to documented research 1 The SME sector has an important role to play in economic development, poverty reduction and employment creation in developing economies. “The link between ICT and growth is strong in developed economies: a report from the Economist Intelligence Unit in Europe 2 shows that a cross-section analysis of 60 countries confirms the view that ICT is strongly linked to economic growth in developed countries,” says Strydom.

Countries such as the US, the four Nordic countries, the UK, Netherlands and Switzerland have shown the fastest labour productivity growth. “The UK’s ICT sector employs over a million people who contribute 10% of their GDP,” he says. Yet in South Africa the lack of proper bandwidth has resulted in the cancellation of two multi-billion rand investments in South Africa that Strydom is aware of.

According to reports3, countries with high penetration levels for fixed telephone lines, mobile phones, personal computers and the internet appear to achieve the greatest economic benefit from ICT. “However, this research also shows that ICT penetration and usage needs to attain critical mass before it will make a significant positive impact on a country’s economy – this doesn’t bode well for SA while Telkom continues its monopoly on fixed line infrastructure,” he believes.

“The cost of bandwidth in South Africa is still extremely high and the infrastructure to grow our broadband is sorely lacking. One just has to take a drive through town to see almost every telephone pole without any telephone cables. Why? Because they have been stolen and Telkom refuses to replace them.”

“Without fixed lines we cannot deliver broadband and as a country we are missing out on the enormous growth that broadband has delivered to first world economies. Due to the lack of fixed lines many people and businesses are relying on mobile connectivity (3G) and this picture is even worse.

“The quality of our mobile data connectivity has seriously deteriorated over the past few months and there are no answers coming from Vodacom, MTN or Cell C. We must have one of the worst mobile infrastructures in the world and an even worse fixed line infrastructure. The amount of R100 million that will benefit business according to the treasury budget report is a pittance compared to what we need.”

He explains that the National Treasury allocated R100million to “Broadband ICT” in 2011/2012, increasing the amount to R150million in 2012/2013 and R200million in 2013/2014. In total R450 million has been allocated to develop the broadband strategy, the broadband policy of government, and the broadband infrastructure and services in underserviced and rural areas.

“This may seem like a big number but to put it in perspective, there are probably more than 100 companies in South Africa whose total ICT budget exceeds R400 million, each,” explains Strydom. “R400 million is a very small number and only R100 million will actually benefit businesses. The rest will be spent on government and rural areas.”

The 2011 Budget Review states that “An affordable, efficient and widely distributed telecommunications network is important for raising productivity and accelerating economic growth. South Africa’s telecommunications infrastructure has improved significantly over the past few years. Two new undersea cable networks (SEACOM and EASSy) have increased available bandwidth. This has contributed to faster internet speeds and lower prices.”

“While these sentiments as expressed by the Budget Review are to be applauded there are some serious challenges before we can get there,” he emphasises.

At least the Budget Review acknowledged that “The cost of internet access, however, remains high and penetration is still relatively low. Only a quarter of broadband subscribers have fixed-line (ADSL) connections. Fixed-line broadband technology is cheaper and faster than wireless technology.”

Strydom continues: “Even though government acknowledges these problems too little is being done to fix the problems. It seems that government is still not realising that implementing a proper, workable broadband strategy will unlock SME growth and job creation as well as increase foreign investment.

“The answer is to break the Telkom monopoly on fixed line infrastructure. According to the Treasury, Telkom’s monopoly of the local loop – the last stretch of infrastructure connecting homes or businesses to exchanges – means that fixed-line prices remain high.

“Government must build and repair the fixed line infrastructure and use technology effectively to prevent cable theft. Further, we must reduce (control) the cost of bandwidth and reign in the mobile monopolies to reduce mobile charges.”

According to Strydom,”If government is serious they could fix this problem fairly quickly, but it seems that they do not see it as a high priority, probably because they don’t understand the potential spin-offs and benefits that it will bring. In Mr. Pravin Gordhan’s speech all the right noises were made but it’s not backed up with workable plans and certainly not with enough money.”

Ends

Reference 1: ICT usage and its impact on the profitability of SMEs in 13 African Countries, MIT Press 2008, Volume 4, Number 1, Fall 2008, 87-100.

Reference 2 & 3: Economist Intelligence Unit, 2004, Reaping the benefits of ICT, Europe’s productivity challenge. Author: Dennis McCauley.

2011 Budget woefully inadequate

2011 Budget woefully inadequate

Pravin Gordhan

Although there are a number of positive elements in the 2011 Budget it is clear that the development of the ICT sector in South Africa is not a priority for the treasury. The National Treasury allocated R100million to “Broadband ICT” in 2011/2012, increasing the amount to R150million in 2012/2013 and R200million in 2013/2014.

In total R450 million has been allocated to develop the broadband strategy, the broadband policy of government, and the broadband infrastructure and services in underserviced and rural areas.

This may seem like a big number but to put it in perspective, there are probably more than 100 companies in South Africa who’s total ICT budget exceed R400 million, each. R400 million is a very small number and only R100 million will actually benefit businesses. The rest will be spent on government and rural areas.

“An affordable, efficient and widely distributed telecommunications network is important for raising productivity and accelerating economic growth. South Africa’s telecommunications infrastructure has improved significantly over the past few years. Two new undersea cable networks (SEACOM and EASSy) have increased available bandwidth. This has contributed to faster internet speeds and lower prices,” the 2011 Budget Review said. These sentiments as expressed by the Budget Review are to be applauded but there are some serious challenges before we can get there. Our cost of bandwidth is still extremely high and the infrastructure to grow our broadband is sorely lacking. One just has to take a drive through town to see almost every telephone pole without any telephone cables. Why? because they have been stolen and Telkom refuses to replace them. Without fixed lines we cannot deliver broadband and as a country we are missing out on the enormous growth that broadband has delivered to first world economies. Due to the lack of fixed lines many people and businesses are relying on mobile connectivity (3G) and this picture is even worse.

The quality of our mobile data connectivity has seriously deteriorated over the past few months and  there are no answers coming from Vodacom, MTN or Cell C. Yesterday I had to make 5 phone calls to complete one call. A call that should have taken no more than 10 minutes ended up taking 25 minutes to complete and probably cost 5 times as much. This is happening so often that I am starting to think that it’s being done on purpose in order to make more money from consumers. We must have one of the worst mobile infrastructures in the world and an even worse fixed line infrastructure. The amount of R100 million is a pittance compared to what we need.

At least the Budget Review acknowledged that “The cost of internet access, however, remains high and penetration is still relatively low. Only a quarter of broadband subscribers have fixed-line (ADSL) connections. Fixed-line broadband technology is cheaper and faster than wireless technology.” Even though government acknowledges these problems too little is being done to fix the problems. It seems that government is still not realising that implementing a proper, workable broadband strategy will unlock SME growth and job creation as well as increase foreign investment. I know of at least 2 multi-billion rand investments that were cancelled due to the lack of proper broadband in SA.

The answer is to break the Telkom monopoly on fixed line infrastructure. According to the Treasury, Telkom’s monopoly of the local loop – the last stretch of infrastructure connecting homes or businesses to exchanges – means that fixed-line prices remain high.

In my opinion we must build and repair the fixed line infrastructure and use technology effectively to prevent cable theft. We must reduce (control) the cost of bandwidth and reign in the mobile monopolies to reduce mobile charges.

If government is serious they could fix this problem fairly quickly, but it seems that they do not see it as a high priority, probably because they don’t understand the potential spin-offs and benefits that it will bring. In Mr. Pravin Gordhan’s speech all the right noises were made but it’s not backed up with workable plans and certainly not with enough money.

So in a nutshell, what will this budget mean for ICT and for broadband?… very little I am afraid.

Mobile networks killing the economy

Mobile networks killing the economy

The Untouchables

Vodacon. The mobile comminucations con of the century.The spectacular explosion of the cellphone industry in South Africa has created a myriad of opportunities for business. It has opened up many new markets and given almost every citizen in this country an opportunity to participate in the digital era. Instead of embracing this new opportunity, mobile service providers in South Africa are destroying it because of their incredible thirst for power and money. It is clear that their drive for profits far exceeds their desire to provide proper service to their customers and this is evidenced by the lack of infrastructure investment.

It is laughable that on most major highways in South Africa there is not 100% coverage. They have been aware of the thousands of complaints for a number of years but still they refuse to upgrade and invest in the infrastructure to solve the problems. In the meantime their executives are earning ridiculous salaries and bonuses for the fantastic profits they generate, but they are unfortunately not measured on customer satisfaction. Why should they care about customer satisfaction? They have a monopoly and definitely not a long term view. They don’t need to listen to anyone and the complaints lodged fall on deaf ears. A few weeks ago there was a discussion on Talk Radio 702 and their switchboard almost crashed from all the calls about the pathetic service provided by these companies.

Salaries

Rob Shuter (Vodacom CFO) R14,205,882
Pieter Uys (Vodacom CEO) R10,700,571
Shameel Joosub (Vodacom SA MD) R9,452,685

Our government is helpless and clueless and doing absolutely nothing to resolve the issue. They have the power to force the mobile companies to improve their service levels but they don’t. One has to wonder why they do nothing.

Vodacom
Even LG knows what's going on!