Vodacom to expand niche offerings
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