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HISTORY
OF VODACOM
In 1994, just before the first democratic elections, one of the most dynamic
companies in South Africa did not exist. Today, Vodacom is valued at between 6
to 7 billion dollars, making it one of South Africa's top ten companies. Vodacom
now delivers a service to some 5.5 million South Africans, forming an integral
part of their lives. Vodacom is a true-blue corporate citizen of the new South
Africa - it was born during the transition to democracy and it truly embodies
the spirit of the Rainbow Nation.
A
REVIEW OF THE PAST SEVEN YEARS:
1993-
Advent of a telecommunication revolution:
In September 1993 no one in South Africa knew the name Vodacom, just as most
people were unaware of the telecommunication revolution which would forever
change the way we communicated and exchanged information. It was during this
month that Vodacom was granted one of two GSM network licenses in South Africa.
As Vodacom Managing Director Alan Knott-Craig did the rounds in business and
media, he said: "Cell phones will change our lives as much or more as
television did". Very few people understood what he meant then.
"Vodacom's initial growth projections catered for 250,000 subscribers
within ten years. We have now exceeded three million during the year 2000."
One of the key elements of the plan was to add local value to imported
technology. GSM, the technology standard in SA's cellular industry, is by its
nature high-tech and sophisticated. However, Alcatel and Siemens, Vodacom's main
network equipment suppliers, have succeeded in adding hundreds of millions of
dollars of local value, thereby minimizing the impact on our balance of
payments.
Knott-Craig had a vision for a leading cellular network. It would be one of the
world's best networks and would offer the best coverage, quality, outstanding
service and it would be run by a team of dedicated professionals. It would also
be dedicated to providing millions of previously disadvantaged South Africans
with meaningful and affordable access to telephones for the first time.
He gathered the best people in telematics, network engineering and marketing
around him. This team worked round the clock to roll out the network nationally
at a rate of more than ten base stations per day, unprecedented in the
international GSM community.
Establishing the brand:
In October 1993 Knott-Craig convinced his shareholders to spend millions on an
advertising campaign which promoted a product that would only be available in
seven months' time. He was evangelical in his belief that the first network to
establish its brand name would become the generic brand. Of course, he was
proven right.
Opening the floodgates:
The floodgates opened on June 1, 1994. The cellular networks officially started
commercial operation and within the first month Vodacom had attracted 50,000
subscribers. By the end of October, Vodacom had raced even further ahead and had
doubled its subscriber base to 100,000.
SA gets connected in a big way:
Call volumes increased by 540% in five months and network capacity expanded as
fast as the equipment could be shipped in. At this stage Vodacom was the fastest
growing network in the world and one of the busiest in terms of call volumes.
A crucial factor in gaining and maintaining the lead was to establish an
effective retail infrastructure. Service providers were already in place and
attracting subscribers through fierce competition at retail level. Cellphone
prices dropped to some of the lowest levels in the world.
By the end of 1994 Vodacom took another bold step that further entrenched its
position as market leader. As South Africans were planning their end of year
holidays, Vodacom was rolling out its network on 3,000 km's of national highway.
This strategy led to another surge in subscriber numbers to 140,000 as
cellphones increasingly became essential for personal safety.
1995
- Personal
safety becomes key:
By the beginning of 1995, the early adopters had all bought their cell phones.
One of the spurs for growth would be personal safety. Vodacom expanded its two
emergency services to launch Vodacom 702 Cellwatch, broadcasting incidents of
stolen or hijacked vehicles. Personal safety became one of the key messages in
Vodacom's advertising.
Addressing the backlog:
It was now a year since the election and the new South Africa was moving
bravely and energetically to improve the lives of millions of disadvantaged
people. One of the biggest challenges facing the new government was a massive
backlog in infrastructure. While the country's first-world component enjoyed the
benefits of superb infrastructure - roads, electricity, water and telephones -
the majority were excluded. Around 98% of the privileged had telephones, but the
average penetration in disadvantaged communities was one line per hundred
people.
When Vodacom's license was issued, one of the conditions was that cellular
telephony would have to address this imbalance. As cellphone fever swept the
country, Vodacom Community Services was working hard in disadvantaged
communities to enable many people to make their first phone call ever. Members
of the community were franchised and trained to become phone shop operators.
Phones a shot in the arm for disadvantaged:
The 10 million dollar community services project aimed to deploy 22 000
phones by mid 1999 and subsidizes phone calls at half the commercial rate. It
has become evident that telecommunications has an enormous multiplier effect.
Many phone shop operators have developed adjacent businesses. Shops have
expanded. Taxi ranks have grown. Hospitals in townships are managed more
effectively.
Venturing into
Africa:
With 40% of
Africa's telephones, South Africa remains the telecommunications leader on the
continent. Vodacom alone handles 10% of Africa's telephone traffic volumes. In
June 1995 the network ventured outside South Africa and was awarded a GSM
license in Lesotho. A joint venture company was set up with Lesotho
Telecommunications Corporation to build and operate a network. The test phase
started in September and the network officially switched on in May 1996.
Vodacom achieved a number of world-firsts in the value-added services arena. It
was the first network to offer a commercial cellular fax/data service and the
first to offer a cellular pay-as-you-use access to the Internet with Yebo!net. A
large number of value added services have been launched and have become an
important competitive advantage, especially in attracting business users.
Industry shake-up and new stability:
During 1996 major consolidation had taken place in the cellular industry
resulting in a shake-up among service providers. By August churn (subscribers
dropping off the network) had been reduced to an excellent level of between 22%
and 24% and the locked subscriber base (bad debts) was in the vicinity of 3%,
10% better than a year ago.
Fresh growth strategy:
It was now time to start taking position for a fresh growth strategy. Midway
through the year 1999, Vodacom had started building its Intelligent Network (IN)
platform, which would open up a new world of opportunities.
The IN platform would pave the way for a number of new products which would
attract new groups of consumers to cellphones. Enabled by the new platform,
Vodacom's four new bundled tariff packages entered the market by October. These
were designed to be user-friendly, were aimed at specific user groups and
followed thorough research into the market and call patterns.
Sigi hits the townships:
The innovation of pre-paid
airtime held a huge advantage for Vodacom's community services. It was now
possible to deploy a phone loaded with pre-paid airtime, substantially reducing
the administration burden. Meanwhile, Vodacom had jointly developed a new
community phone unit with Siemens and Psitek called a Sigi. These individual
units pre-loaded with airtime paid for by the operator, would take Community
Services another step closer to putting a phone service in place on every street
corner in townships. Some 2,000 Sigi's went into production in October and a
further 8,000 were manufactured by the end of the year.
The Sigi's have changed many lives. Sterkspruit is a sprawling city with a
population of 350,000, eleven schools and hundreds of businesses. And until
October 1996 Sterkspruit did not have one single telephone. The closest phone
was 40 minutes away in the town of Zastron.
In November Livingston Hlawula and Zola Baduza, Vodacom's phone shop operators
in Sterkspruit, bought 50 Sigi's. These have been deployed at taxi ranks, spaza
shops and the Empinisweni hospital and have been a shot in the arm for the
Sterkspruit community.
1998
- The one stop cellular shop
The South African cellular
industry is organized in such a way that customers are often somewhat removed
from the cellular network operators. Within the channel, service providers are
responsible for the actual retailing of airtime contracts and they generally
have more day to day contact with customers. Therefore, Vodacom developed the
very first cellular lifestyle complex in the world - Vodaworld - to generate
loyalty towards Vodacom with the single-minded goal of satisfying every customer
who visits the center while keeping the service provider structure in place.
A call to end crime:
Vodacom hit back harder at cellphone thieves during 1998 with an initiative to
encourage the public to blacklist cellphones when they are stolen and to
discourage them from buying stolen cellphones. Blacklisting has the effect of
rendering cellphones inoperable on GSM networks around the world. Vodacom
launched an advertising campaign to educate the public about what to do if a
cellphone is lost or stolen. The network operator also set up an information
line (124 from cellphones or 082 124 from a Telkom phone) that details the
correct procedure for blacklisting a cellphone. Vodacom has also placed an
blacklist information sticker on all prepaid starter packs.
1999
- Universal coverage
This is the year when
Vodacom's coverage map and the map of the world converge. Vodacom subscribers
will eventually be able to enjoy blanket mobile telephone coverage of South
Africa and the world through Vodacom's service provider agreement with
Globalstar Southern Africa (Pty) Ltd. During July 1999, Globalstar completed the
minimum space segment configuration required for a soft launch in South Africa
between November 1999 and January 2000. This means that corporate users will be
able to try out the Globalstar network during this time. Individual users are
scheduled to begin using the network closer to the New Year.
Globalstar will meet the needs of cellular users who roam outside
terrestrial-based cellular coverage and South African subscribers will be able
to use dual-mode phones capable of switching from conventional cellular
telephony to satellite telephony automatically or as required. The $2.6 billion
Globalstar system will comprise 52 Low Earth Orbiting (LEO) satellites and a
global array of some 60 ground stations. People virtually anywhere will be able
to make and receive calls using cellular-sized handheld, vehicle-mounted and
fixed-site terminals. Vodacom's UK partner, Vodafone AirTouch, has a 7,5% stake
in Globalstar and is an exclusive Globalstar service provider in South Africa,
Lesotho, Swaziland, Namibia, Zimbabwe, Botswana and Mozambique. Vodafone
AirTouch will offer Globalstar service through its existing cellular partners,
which include Vodacom.
Vodacom also signed a roaming agreement with another satellite system, Iridium.
The agreement with Iridium means that Vodacom subscribers in possession of
Iridium satellite handsets are able to use their Vodacom SIM cards in the
handsets.
During the financial year ending 31 March 2000, Vodacom will spend more than 300
million on increasing network capacity and coverage and enhancing the quality of
its network, creating adequate capacity for almost three million subscribers.
This investment comes on the heels of a 300 million capital expense in Vodacom
network during the previous financial year, and will bring the total capital
expense invested in the network to 9 billion since Vodacom started operations in
June 1994. This investment represents the largest private sector capital expense
project this decade
This massive investment has two objectives. Firstly, to ensure the best cellular
service for Vodacom's existing two million subscribers, and secondly, to ensure
adequate capacity for the constant growth in new subscribers.
The continuing growth has been fuelled largely by the increase in prepaid
subscribers, which now account for half of Vodacom's customer base. This growth
in prepaid has necessitated the commissioning of three more Intelligent Network
platforms in addition to the existing three.
Vodacom
in Africa:
Vodacom won a bid to operate Tanzania's second GSM cellular network in July
1999.
The 10-year license is Vodacom's first outside the Southern African Development
Community (SADC) and is worth more than 50 million dollars. Having previously
concentrated on dominating the South African market, resulting in a 60% share of
Africa's most profitable cellular market, Vodacom is looking at all
opportunities on the African continent which make economic sense.
The company already operates a GSM cellular network in Lesotho in partnership
with the Lesotho Telecommunications Corporation. Vodacom partnered Tanzanian
company Planetel Communication Ltd and holds 50 percent of the consortium. There
are presently three cellular networks operating in Tanzania, with one being a
GSM cellular network.
Vodacom
Launches South Africa's Cheapest Cellular Package:
In August 1999, Vodacom made cellular accessible to anyone who can afford $1 per
month, dropping the entry level to its lowest level ever and making cellular
accessible to low-income users.
Market research showed that there is a need for a product that allows the user
incoming calls only, resulting in the launch of a new $12 Vodago Incomer
voucher.
This product provides the subscriber with a one-year airtime window for free
incoming calls and free calls to voicemail and emergency services. If users want
to make outgoing calls, they can buy additional airtime with the existing range
of Vodago vouchers. Users will also be able to accumulate airtime for outgoing
calls during the remainder of the 365 days that their Incomer voucher is valid
for.
Vodacom
Service Provider Company (Pty) Ltd.:
The ascendancy of prepaid technology has meant a lesser role for the service
provider model, so in March 2000, we amortized our various service provider
companies into a single entity. Teljoy Holdings Ltd, GSM Cellular (Pty) Ltd and
Vodacom (Pty) Ltd were the consolidating parties.
Vodacom Service Provider Company continues to distribute products through four
distribution channels; Vodacom National Chains, Vodacom Dealers and Franchisees,
Vodacom Corporate Solutions and Vodacom Direct.
Emerging
market drives prepaid:
From November to December 1996, we developed a product called prepaid. And in
those days, no one had heard about a prepaid product, in fact, it was
touch-and-go that we would be allowed to introduce it into the country. Today,
we all know that prepaid is a principle reason that the cellular industry has
grown to some 500 million phones in the world.
Prepaid currently constitutes 90% or more of our connections to Vodacom - some
80% of our base is prepaid today. Prepaid is very significant, as soon as we
introduced it we brought capacity onto our network. Our projected number of
total prepaid customers had been 50 000. We actually connected 50 000 in the
first month!
In 2000, our gross connections on prepaid numbered 2,5 million. Now the figure
of 2,5 million is a huge number when you take into account the logistics,
because when you're selling prepaid, you're clearly selling a telephone service
that already exists - that has to have a telephone number. People walk into a
shop, they choose their number, they've paid for their telephone service and
they have a telephone service. So our distribution channels had to be like that,
it could not be high cost - it had to be wherever the people were.
In South Africa today, it is very easy to buy a telephone service - it has to be
- for high telecommunications penetration into a developing country like South
Africa.
The number of Vodacom users passed 4 million on 15 October 2000; a success
accelerated by the rapid acceptance of prepaid cellular by the emerging market.
In just over six years, prepaid has well and truly driven such dynamic success.
When cellular was launched in South Africa in 1994, nobody would have thought
that cell phones would eventually be owned by such a wide variety of people.
Prepaid vouchers have meant that everybody - from a businessman to a street
hawker - can own a cell phone, and more than 90% of all new connections to the
Vodacom network are now prepaid.
2001-
New Horizons
VODACOM
CONGO (DRC)
The African Renaissance moved a step forward during December 2001 with the
launch of Vodacom Congo (DRC) s.p.r.l. This followed the ratification of a joint
venture agreement between Congolese Wireless Networks (CWN) and Vodacom
International Holdings (Pty) Ltd by the Vodacom Group (Pty) Ltd board. CWN
operates a GSM network in the Democratic Republic of the Congo (DRC) with some
22,000 customers and has 18 years remaining of its 20 year license. The DRC has
always been of particular interest to Vodacom International primarily because
there are only 100,000 phones for more than 60 million people. Challenges there
may be, but a teledensity of about 1.6 telephones per 1,000 people strongly
suggests that opportunities abound for GSM operators in Africa's third biggest
country. The agreement was signed by Mr. Mthembu, Managing Director of Vodacom
International Holdings (Pty) Ltd and Deputy Group CEO of Vodacom Group (Pty)
Ltd, and Mr. Alieu Conteh, Chairman and CEO of CWN. Vodacom will have a 51%
stake in the joint venture while CWN will have a 49% stake. Mr Mthembu will
occupy the chairman's position and Mr. Alioume Dieng will become CEO of the new
consortium. Vodacom International believes that the total potential market for
cellular stands at 5% of the DRC's 60 million inhabitants and the company is
confident that its new joint venture will capture a significant market share.
Existing GSM cellular players in the DRC besides CWN are Sait with 30,000
customers and Celtel with 60 000 customers. There is also an analogue network
called Starcell with approximately 20,000 customers. Between them, the
incumbents primarily cover Kinshasa, Lubumbashi and the mining area of Mbuji
Mayi.
