Vo­da­com to ex­pand niche of­fer­ings

Finweek English Edition - - TECHNOLOGY - BY GUGU LOURIE

Vo­da­com, South Africa’s bi g g e s t mobi l e phone op­er­a­tor in t e r ms o f sub­scribers, plans to scale up its niche f uneral and l ife in­sur­ance busi­ness.

The mo­bile phone op­er­a­tor, which is 65%-owned by Bri­tish mo­bile gi­ant Voda­fone, pro­vides l ife and f uneral i nsurance. It a l so pro­vides de­vice in­sur­ance ser­vices to both con­tract and pre­paid cus­tomers in SA.

Vo­da­com, which is val­ued at more than R200bn, has more than 32m cus­tomers in SA. The com­pany has 27.2m pre­paid users and 4.9m con­tracted sub­scribers. Presently Vo­da­com pro­vides de­vice in­sur­ance to only 7% of its con­tract sub­scribers – a sit­u­a­tion that leaves sig­nif icant room for growth in this of­fer­ing. The to­tal in­sur­ance mar­ket in SA is worth ap­prox­i­mately R61bn.

“Our fo­cus has mainly been on de­vice in­sur­ance, but we in­tend to scale up our fu­neral and life in­sur­ance busi­ness,” the com­pany said in its latest an­nual re­port.

The move by Vo­da­com is part of its strat­egy to di­ver­sify its rev­enue streams.

With mo­bile voice de­clin­ing 4.6% and the im­pact of lower mo­bile ter­mi­na­tion rates – the rates one net­work op­er­a­tor pays another to put through calls to its net­work – shav­ing R2bn off Vo­da­com’s rev­enue line and another R1.2bn off its EBITDA line in the 2015 fi­nan­cial year, the com­pany has had to think of ways to sup­port growth as its home mar­ket ma­tures.

To build re­silient rev­enue streams and se­cure fu­ture growth op­por­tu­ni­ties, Vo­da­com is in­vest­ing in di­ver­si­fy­ing its busi­ness in a num­ber of fo­cused ways. These in­clude selling fi­nan­cial ser­vices prod­ucts such as in­sur­ance, pro­vid­ing con­tent, con­nec­tiv­ity for ma­chine-toma­chine ser­vices, fi­bre-to-the-home and ecom­merce.

Vo­da­com a l r e a dy r e g a r ds t he in­sur­ance port­fo­lio as a note­wor­thy busi­ness. It gen­er­ates about R441m in rev­enue. The mo­bile op­er­a­tor says its in­sur­ance busi­ness port­fo­lio has been grow­ing steadily at 36% a year.

“On av­er­age the de­vice in­sur­ance busi­ness pro­cesses ap­prox­i­mately R1m in claims per work­ing day. The num­ber of poli­cies in our long-term as­sur­ance busi­ness grew more than 100% off a small but fast-grow­ing base,” the cell­phone op­er­a­tor said.

The num­ber of ac­tive smart data de­vices on Vo­da­com net­work rose 29.7% to 11.6m (of which 9.3m are smart­phones, 1.1m tablets and 1.2m modems) in the year to end March, fu­elled by more af­ford­able de­vices.

Vo­da­com has sold more than 3m low­cost smart de­vices, in­clud­ing Vo­da­com­branded Smart Kicka and Smart Tab, which sold more than 1m units since launch­ing in the third quar­ter of 2015 fis­cal year.

The com­pany’s in­sur­ance busi­ness can grow ex­po­nen­tially by sign­ing up the 93% of its con­tract cus­tomers that are not yet us­ing its de­vice in­sur­ance of­fer­ing.

“We will con­tinue to use our cus­tomer value man­age­ment sys­tem to mar­ket i nsurance prod­ucts to our ex­ist­ing cus­tomer base. Cus­tomer de­mand for life and de­vice in­sur­ance is grow­ing,” said Shameel Joosub, Vo­da­com’s CEO.

“De­spite the macroe­co­nomic pres­sures in our mar­ket, it’s re­ally im­por­tant that we in­vest ef­fec­tively in each of our growth pil­lars to en­sure we di­ver­sify our rev­enue streams.”

With 93% of its con­tract cus­tomers not cov­ered by its hand­set in­sur­ance, Vo­da­com is set to be a big player in this space and will con­tinue to re­ceive more rev­enues from this f inan­cial ser­vices prod­uct.

THE COM­PANY’S IN­SUR­ANCE BUSI­NESS CAN GROW EX­PO­NEN­TIALLY BY SIGN­ING UP THE

The Vo­da­com Group’s head­quar­ters in Johannesburg

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