How Vodacom got itself on a fully digital path
Vodacom says it is looking at bringing new skills to both its board and operations as it repositions itself into a fully digital organisation.
Digital technology services are disrupting the traditional business models of many industries. For mobile network operators, revenue from the traditional voice business is under pressure as more people opt for chat services and for making voice calls over platforms such as WhatsApp.
To offset the pressure on voice revenue, mobile network operators are spending heavily to upgrade their network capacity and coverage to offer better internet quality and speeds to drive data adoption.
The aim is to have a network that can be a platform for a wide range of digital services such as mobile payment, music and video streaming and the Internet of Things.
Vodacom Group CEO Shameel Joosub said in the company’s 2017 annual report released on Thursday that digitalisation offered valuable opportunities for Vodacom to extend revenue streams beyond connectivity. "We have begun the process of transforming Vodacom into a truly digital organisation, with our investment in acquiring new skills and talent in areas such as big data, analytics, actuarial science and digital marketing," he said.
Vodacom has teamed up with tertiary institutions to develop and access the required emerging skills for its digital future. Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said telecoms had already been affected by over-the-top services such as WhatsApp and no doubt they would continue to be threatened by new forms of digitalisation in the future. However, the telecoms operators were also benefiting through higher data usage as more content and services came online.
"The most successful telecoms companies of the future are likely to be those with networks and infrastructure that are ready to accommodate the growing shift to digitalisation as well as the ability to share in the revenues of content providers," he said.
While he believed Vodacom was positioning its network well for the future, he was not yet convinced about the group’s ability to share in the revenues of content producers such as social networks, which are mostly having a free ride on those networks.
Takaendesa cautioned investors that it might take a long time before these digital initiatives started to contribute meaningfully to earnings.
Farai Mapfinya, chief investment officer at Falcon Crest Asset Managers, welcomed Vodacom’s digital strategy, saying it was no longer good enough to own infrastructure if you could not capitalise on the network effect of the users.
Over-the-top operators such as WhatsApp had figured this out and realised the value of the network effect and the opportunities big data presented.
The largest taxi business, Uber, owns no vehicles; Alibaba, the biggest retailer, has no inventory; the biggest accommodation provider in the world, AirBnB, owns no property. "Digitisation allows for the introduction of innovative and disruptive business models and process flows," he said.
Vodacom announced the appointment of Jabu Moleketi as its chairman to replace Peter Moyo, who stepped down after eight years to join Old Mutual Emerging Markets as CEO.