Interim 2015/2016 Vodacom Group Ltd Earnings Call
Nov 09, 2015 AM CET
VOD.J - Vodacom Group Ltd
Interim 2015/2016 Vodacom Group Ltd Earnings Call
Nov 09, 2015 / 02:00PM GMT
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Corporate Participants
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* Shameel Joosub
Vodacom Group Ltd - CEO
* Till Streichert
Vodacom Group Ltd - CFO
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Conference Call Participants
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* JP Davids
Barclays - Analyst
* Cesar Tiron
BofA Merrill Lynch - Analyst
* David Lerche
Avior Capital Markets - Analyst
* Chris Grundberg
UBS - Analyst
* Craig Hackney
NOAH Capital Markets - Analyst
* Myron Vanishavatmin
VIPSA - Analyst
* Mike Gresty
Deutsche Bank - Analyst
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Presentation
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Operator [1]
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Good day, ladies and gentlemen, and welcome to the Vodacom Group Limited Interim Results conference call for the six months ended September 30, 2015. Vodacom Group CEO, Shameel Joosub, will be hosting this conference call. I will now read the forward-looking disclaimer before handing over to Mr. Joosub.
This announcement sets out the interim results of Vodacom Group Limited for the six months ended September 30, 2015, contains forward-looking statements, which have not been reviewed or reporting on by the Group's auditors with respect to the Group's financial condition, results of operations and businesses and certain of the Group's plans and objectives. In particular, such forward-looking statements include statements relating to the Group's future performance, future capital expenditures, acquisitions, divestitures, expenses, revenues, financial conditions, dividend policy and future prospects, business and management strategies relating to the expansion and growth of the Group, the effects of regulation on the Group's businesses by government in other countries in which they operate, the Group's expectations as to the launch and rollout dates for products, services or technologies, the expectations regarding the operating environment and market conditions, growth and cost from the use of the customers and usage and the rate of dividend growth by the Group. If you do not have a copy of the results announcement and presentation it is available on the investor relations website on www.vodacom.com.
(Operator Instructions). Please also note this call is being recorded. I would now like to turn the conference over to Mr. Shameel Joosub. Please go ahead, sir.
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Shameel Joosub, Vodacom Group Ltd - CEO [2]
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Thank you. Good afternoon, everyone, and good morning to those in the US. I'm joined by our new CFO, Till Streichert, who was previously my Finance Director in South Africa. I'm also joined by Belinda, who is now CFO in the South African business.
Before we look at the numbers, let me tell you what stands out for me in this set of results. Firstly, we really stepped up our level of investment to make the [Internet] experience much better for all our customers across our markets. And the good news is that it's translating into accelerated data revenue growth, far better than what we expected.
I don't remember a time when we actually showed ARPU growth, so it's good to see the improved trend in South Africa, with ARPU growing in the second quarter.
Thirdly, we are making our offers more affordable to our customers, particularly bundle offers. And it's clear that this is how customers want to consume our products, with over ZAR0.5b bundle sales in the first half. And last year the international operations delivered 10% service revenue growth in constant currency, a step up from last year, 12.6% reported.
For those of you who want to, who have access to our presentation, you will see the performance of our key numbers on slide 4. Group revenue was up 6.4% to just short of ZAR40b, and service revenue grew 4.9% to ZAR32.2b. If we adjust for FX in the prior year adjusted, the numbers are 6.8% and 5.6% respectively. It is good to see that we are still adding customers to our networks, with Group active customers up 6.8% to 65m.
We invested ZAR6.2b in CapEx, which is almost 16% of value. This is the result of the 4G and 3G coverage expanding and our network speeds getting even faster. So more customers, more coverage and faster speeds has boosted Group revenue growth by 34% to ZAR10b from data.
We've tightened up things a lot to ensure that we maximize our return on channel and subsidy investments, and Till has done a fantastic job of managing our costs from there. These two things have helped lift Group EBITDA by 13% and delivered a 2.1-percentage-point margin expansion to 36.7%.
Our operating free cash flow is pleasing, up 31% to ZAR5.8b. And our earnings per share was up 6% from ZAR4.15 to ZAR4.40. And the Board has approved a final dividend of ZAR3.95, in line with our dividend policy of at least 90% of headline earnings per share.
Let me now move into more specific highlights in South Africa. Data revenue was super strong, up 33%, supported by a 31% increase in smart devices in our network. This shows that that is in line with ARPU.
Importantly, we made significant progress in our price transformation, with the contract segment nearing completion and prepaid voice bundle adoption increasing. We've sold 500m bundles in the first half of the year, 350m in voice alone. We added 1.6m customers in the first half, increasing our active customer base by 3.5% year on year, to just less than 34m customers.
On the reported side of life, service revenue grew 2.9%. But if we exclude the prior year ZAR325m accounting estimate change, service revenue grew by 4.3%. Revenue grew 5.1% or 6.2% if we adjust for the ZAR325m, boosted by strong data growth and 12% growth in equipment revenue from higher device sales.
EBITDA grew 13.1% due to many commercial actions that we took in the second half last year as well as our strong focus on cost efficiencies.
I want to spend more time focusing on detail on how well we executed on our data strategy in South Africa. I think we've made excellent progress on all four pillars. We have sustained data revenue growth above 30% for three consecutive quarters as we see high demand for Internet usage, and we've improved our data monetization as well. A driver of strategy of growing data by firstly increasing 3G and 4G coverage, thereby increasing our addressable markets.
Access to more affordable devices is playing a more meaningful role and it's also improving data uptake. The launch of affordable daily and hourly price data bundles, for example, ZAR3 for 50 megs and ZAR10 for 100 megs, led to data bundle sales doubling from last year. We've sold more than 150m bundles in the first half. By the way, those of you who have access to the presentation can see this nicely spelled out on slide 9.
The number of active smart devices in the network increased by 31% to 12.6m, supported by offering handsets financing and more affordable devices. We sold 1.3m Vodacom-branded devices in the first half.
The average amount of data used by customers on the smartphones keeps increasing in the period and is now up to 425 megs per customer. That's an increase of 27%. You know in South Africa we launched a cheap ZAR999 3G tablet, which has created a new market segment and has resulted in tablets increasing 126% to 1.4m tablets.
The story I've been telling you for several quarters about how customers' ARPU gets lifted is now, by 15% to 17%, is even slightly stronger and it's quite nicely laid out on slide 31 of our deck. So that's a 16% to 17% ARPU uplift when a customer converts from 2G to 3G or from 3G to 4G.
So that's the South African [only]. Let's move on to our international segment. The international operations delivered a solid performance and maintained double-digit service revenue growth. Service revenue increased 12.4% and accounted 26% of Group service revenue. And our EBITDA, that was up 10% and now actually contributes 16% of Group EBITDA.
Even the low penetration in these markets, we still see good growth, up 11% to over 31m customers. As only about 42% of these customers are using data, there's still lots of potential left for data growth. Data users were up 14% and data service increased 180%. Our [data packs] are progressing well, with a 30% increase in active customers to 9.2m customers, fueled by expansion in the distribution channel and growing ecosystem.
In Tanzania, M-Pawa, our savings and loans product, is gaining traction, with 1.3m customers actively now using the service. We've also recently launched international money transfer and have seen good uptake on this service.
On the network side of things, we also ramped up our CapEx on the international market, spending [36%] of revenue. That's given us 47% more 3G sites and 24% more 2G sites. And it's underpinning the 108% growth that we're seeing in data. That's traffic-wise.
That concludes our highlights in the two segments. Let me just give you some updates on our medium-term targets and our priorities. We are confirming our medium-term targets, which are low single-digit service revenue growth, mid single-digit EBITDA growth and CapEx between 14% and 17% of revenue.
Although performance in the first half is stretching ahead of targets in service revenue and EBITDA, I'd like to remind you that the targets we're setting at a compound annual rate over the period from March 2014 to March 2017, and we, in our first year, we delivered -- and in our first year we delivered below target, mainly due to the mobile termination rate cuts. This means in year two and year three we are expected to be higher to compensate for the weaker year one, so basically the result that you're seeing in the six months is part of that outperformance.
While service revenue and particularly EBITDA, both in the first half, are very favorable compared to the targets, we did not expect EBITDA growth to be sustained at such a high rate of 13% into the second half.
Half two will carry higher costs for publicity, network and capacity building in fiber and in content. Year-over-year growth will be affected by the tougher competitors in half two last year, where profitability stepped up as a result of our efficiency initiatives.
Just to share some of my priorities for the rest of the year, firstly I would like to conclude Neotel transaction soon. And second remains critical in all our markets, so working with the governments to ensure we expect them to deliver 4G to more customers is super important for us. Also I would like to accelerate our fiber deployment because we think this is a real opportunity for us. Neotel will give us the ability to really accelerate our efforts here.
We hope to sustain decent service revenue growth into the rest of the year with our 3G and 4G networks translating into higher data usage.
We see an accelerating demand for enterprise services and we will continue to leverage our strong mobile brand and Vodafone global footprint.
We will also continue to focus on key acceleration units, particularly financial and content services. Commercially our focus will remain on data monetization as well as price transformation, while keeping our focus on our costs.
I also want us to focus even more on the customer experience into the balance of the year. I think our markets will remain competitive, and of course regulatory and macroeconomic risks are always there. Please don't forget that in South Africa we just took another cut in mobile termination rates, but it's not such a big thing like it was last year because the big impact was taken in the prior year.
Despite these pressures, we are confident that our substantial investment in both network and customer experience will differentiate us and is expected to translate into customer growth as well as increased usage.
Okay. That concludes my comments. Till and I are ready to take any questions that you may have.
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Questions and Answers
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Operator [1]
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(Operator Instructions). JP Davids, Barclays.
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JP Davids, Barclays - Analyst [2]
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Hi. Good afternoon. Just a couple of questions around cash flow, please. In the first half of the year you obviously had a big working capital and other outflow. Can you unpack that number a little bit?
And then slightly more broadly, do you expect that your free cash flow net income will converge in -- if we look at the full-year FY 2016 numbers and full-year FY 2017 numbers, are there going to be big differences between (technical difficulty) cash flow statement? Thank you.
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Till Streichert, Vodacom Group Ltd - CFO [3]
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Let me start off with the first one and then I'll try to answer the second question, but I couldn't hear it in full so perhaps you just need to raise your question again. So in terms of unpacking the cash flow, so in essence, look, we've had basically an operating free cash flow increase of 13.2% on the back of a 13% EBITDA growth, and in essence the working capital absorption offer. So we had a similar working capital investment as we had last year, and that was pretty much due to the handset financing that we are putting into the market.
The only real difference between basically last year's working capital or level of working capital investment and this fiscal year was -- I think you are familiar with the fact that we are selling our handset finance and receivables, those cash flows, over to third party banks. And those tranches, in essence, they -- we aggregate the cash flow. And then once we've got enough we effectively offer them to the third party banks. And that obviously happens at certain points in time. And one of those transactions was just concluded outside of the reporting period of the first half, and that is probably what you're looking at comparing last year to this fiscal year.
At bottom line it is our good trading performance and EBITDA that flows into cash.
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JP Davids, Barclays - Analyst [4]
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Okay. Thanks, Till. Would you like me to clarify the second part of the question or are you okay to give it a shot?
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Till Streichert, Vodacom Group Ltd - CFO [5]
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No, please. Please just clarify again.
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JP Davids, Barclays - Analyst [6]
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So, yes, the question broadly is will working capital, the outflow reverse partly into the second half of the year? And along with that, will there be more of a convergence or an alignment between net income and free cash flow for the full year 2016?
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Till Streichert, Vodacom Group Ltd - CFO [7]
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Yes, okay. So look, in essence you've got to keep in mind for half two that we're obviously continuing to invest on the CapEx side. So you would have effectively some cash out on that side. So I would be a bit careful of that basically coming back into cash.
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JP Davids, Barclays - Analyst [8]
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Okay. Thank you.
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Operator [9]
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Cesar Tiron, Bank of America-Merrill Lynch.
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Cesar Tiron, BofA Merrill Lynch - Analyst [10]
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Yes. Hi. Thank you. Two questions, please. My first question is whether you see any sign [in 2014] from largest competitor is catching up with you in terms of network quality and whether, as a result, there is a risk for you to increase your CapEx in the next couple of years, especially if we factor in the weakened -- the weaker rand?
The second question will be on LTE auctions and whether you think we could be negatively surprised by the price whenever the licenses will be auctioned. Thank you.
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Shameel Joosub, Vodacom Group Ltd - CEO [11]
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Okay. So maybe to start, I think, look, what we have seen is less competition, right? Because we've put a bit capital investment in, MTN has increased its level of investment. They're trying to close the gap, but obviously we're continuing to invest as well.
I don't think it means a step up in the level of capital investment, but more importantly, I think, as long as we're willing and we're getting the return on the investment, it justifies the level of investment that we're putting in currently. So I think we're definitely seeing the results coming through. So we're quite encouraged by that.
What we've instead done is instead of increasing CapEx, we've reprioritized CapEx during the year. And we've said, look, things like let's put shops, building of shops on hold and basically let's put more money into the network because we're seeing it monetize faster. So we did reprioritize certain projects so that we could get some of the data uplift coming through.
On spectrum, I think, from a spectrum perspective, I think the way Icasa's currently written the document, it seems to be more favored towards obligation as opposed to trying to maximize the price. So we think, with the level of obligations that they've included in the deal, we think that the reserve price will be lower in terms of that. We can't say what the exact amounts will be, but effectively we think it will be lower.
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Cesar Tiron, BofA Merrill Lynch - Analyst [12]
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And would that lead to higher CapEx?
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Shameel Joosub, Vodacom Group Ltd - CEO [13]
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No, I don't think it leads to higher CapEx. I think -- we've already put a lot of the capital investment in. So let me give an example. Once you've upgraded to 4G, effectively if we need to -- if we get access to spectrum, what it will mean is that we have to put active antennas throughout the network, which isn't a big -- which isn't a massive cost. It just means we can utilize the technology a lot better than what we're doing today. And we can penetrate buildings, in-building coverage a lot faster, and even the quality of voice will improve a lot because we don't have to refund as much.
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Cesar Tiron, BofA Merrill Lynch - Analyst [14]
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Got it. Thank you so much.
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Operator [15]
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(Operator Instructions). David Lerche, Avior Capital Markets.
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David Lerche, Avior Capital Markets - Analyst [16]
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Hi. Good afternoon, gentlemen, and Belinda, of course. And two questions from me, please. Firstly, you mentioned you've squeezed a further percentage point out of the channel. I'm just wondering how much more can you squeeze given that you've also brought in Nashua and of course are going to shortly bring in Autopage?
And then secondly, just a detail around the average cost of debt. It was about 7.2% for the first half, but this morning you did mention that the new debt's coming in more at 8.5% or thereabouts. So can you maybe just give a little bit of guidance on where you expect that average cost of debt to be going forward? Thank you.
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Shameel Joosub, Vodacom Group Ltd - CEO [17]
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Okay. So just to be clear, what we did last year is we brought down the [Nashua] margin, so we this year regained the full impact of that [Nashua] margin coming off, so that was 1%. We -- also Nashua is in the numbers. We migrated it in November last year. So you've got the benefit of that in the first half coming through as well, and the saving.
The next one is obviously Autopage, and there will be about a ZAR300m-a-year saving from Autopage, very similar to what we had with Nashua. So that will help to reduce the cost, but obviously it won't be in this financial year. It will be in the new financial year because we're waiting for the regulatory approval, the Competition Commission and tribunal approvals to come through. Obviously the less complicated deal, Nashua took about five months and so we should see approval before March, I would say, next year.
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Till Streichert, Vodacom Group Ltd - CFO [18]
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Okay, Shameel, let me take the second question on the cost of debt. So what we've had to report was effectively a 7.2% average cost of debt for half one, which is just 0.1 percentage points up from last year. And that is really on the back of the [J bar] increase. And what I've explained earlier today in the results presentation and what you see also in the notes of our financial results, note 8, was simply a detail. As we increased the share of fixed-rate debt, and I quoted a ZAR4b long-term loan which we've taken at a fixed rate of 8.64%, and effectively ZAR1b we've drawn down in the reporting period, but that is really to improve the mix between floating and fixed rate. Again, our average cost of debt was just slightly up by 0.1 percentage point from one year to the other.
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David Lerche, Avior Capital Markets - Analyst [19]
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Excellent. Thank you.
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Operator [20]
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Chris Grundberg, UBS.
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Chris Grundberg, UBS - Analyst [21]
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Hi, guys. Thanks. A quick couple from me. I just wondered if you could give an update at all on your self-provisioning targets in SA, if they've changed at all. We can see the uptick there in terms of self-provision sites [for theory], but what do you think that percentage can get to? And then if you can flesh out at all any specific saving related to that in the period, that would also be interesting.
And then further, I may have misheard, but I thought you said this morning that there was some restructuring around the DRC in the period. Apologies if I missed a detail there, but if you can maybe flesh that out a little and perhaps indicate whether or not there's any more to come.
And then very lastly, just on Tanzania. I just wonder if you can give maybe a little bit more detail on your current views of competitive landscape, what you're seeing, how you're responding and what you think the outlook is there for the next year or so. Thanks.
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Till Streichert, Vodacom Group Ltd - CFO [22]
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Shall I take the DRC restructuring one and then we'll work it one by one through? So on the DRC side, yes, indeed, I mentioned earlier this morning we had a restructuring charge of round about ZAR80m in the DRC. So that's what goes effectively through your -- through the payroll cost line in your financials. So that's basically the answer to the third question.
Now in terms of the self-provisioning target, we are sitting right now on round about 85% self-provisioning. And look, we are looking at a further saving, but definitely not as much as we've seen basically over the past three years in terms of self-provisioning savings. So I think that's probably what you are looking at there.
And on Tanzania, do you want to take that question?
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Shameel Joosub, Vodacom Group Ltd - CEO [23]
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Yes. I think from a Tanzanian perspective, I think where we stand is basically we've had some price transformation. So we did have some price competition there. We've seen three sequential price increases coming through, so there is a recovery coming through in the numbers. We've also had a change in management and so on. And we've put some good recovery plans in place and I think we'll see a better performance in the second half of the year or rather a step-up in performance. And as with the pricing, the pricing points, if you like, are definitely getting much better.
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Chris Grundberg, UBS - Analyst [24]
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That's helpful. Thanks.
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Operator [25]
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Craig Hackney, NOAH Capital Markets.
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Craig Hackney, NOAH Capital Markets - Analyst [26]
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Thanks. Just looking into South Africa, your messaging revenue showed some growth for the first time in quite a long time. It seems the volumes are still under pressure but the average rates for message has gone up quite significantly. Could you just talk a little bit about that?
And then also just on South Africa again, well, South Africa and international, if you could give us the interconnect costs for your SA and international segments, please.
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Till Streichert, Vodacom Group Ltd - CFO [27]
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Okay. Let me take the first question then and then we'll go through interconnect costs. So on the messaging, yes, you're right; that was strong. In essence it is the normal messaging continued to decline, as you would expect given all the over-the-top solutions that are out there. But we have indeed quite pleasing wholesale messaging growth. That was quite strong, which effectively gives you the balance of it.
And on interconnect cost, in South Africa in the first half of this fiscal year, that was close to ZAR1b. So ZAR992m was the interconnect cost. And in the internationals, it was ZAR390m.
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Craig Hackney, NOAH Capital Markets - Analyst [28]
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ZAR390m?
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Till Streichert, Vodacom Group Ltd - CFO [29]
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That's correct.
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Craig Hackney, NOAH Capital Markets - Analyst [30]
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Thank you very much.
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Operator [31]
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(Operator Instructions). [Myron Vanishavatmin] from [VIPSA].
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Myron Vanishavatmin, VIPSA - Analyst [32]
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Good afternoon, guys. Thanks for taking my call. I've got a couple of questions. If I can just kick off with the first one. The CapEx that you're guiding, 14% to 17% for this period that you're talking about, the three-year period ending in a couple of years' time, can you unpack broadly, just broad ballpark, how much of that money is actually going into the radio network excluding transmission, so on the radio side of things?
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Shameel Joosub, Vodacom Group Ltd - CEO [33]
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Okay. Next question while we're waiting for that one?
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Myron Vanishavatmin, VIPSA - Analyst [34]
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Okay. The next one is your Vodacom business service revenue, I think that grew by 12.8%. How much did the fixed line business grow? Was it different? Was it more? Was it less? Do you have a sense of that?
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Shameel Joosub, Vodacom Group Ltd - CEO [35]
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Okay. So the fixed line business grew by 31%. Okay? That is now about ZAR1b in the first half that came from the fixed line.
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Myron Vanishavatmin, VIPSA - Analyst [36]
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Right. Now, so just on that then, is it cloud and hosting? Are you seeing that you're winning business on the incumbent? Is it new business? Is it --? Where's all this revenue coming from?
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Shameel Joosub, Vodacom Group Ltd - CEO [37]
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So effectively it's coming from winning business from -- so I think two things are happening. One is I think the market is expanding and the market -- growth in the market is expanding. So in terms of data growth and basically enterprises needing to consume more data, if you like, and so that's why I think putting in proper fiber into the Company has become a lot more important.
Secondly, we think good uptake of (inaudible) now, Office 365 and so on and people being able to access that from in the cloud. So I think that's also proving to be quite successful as well.
And then IP-VPNs, where effectively we're connecting more and more businesses to -- where they're creating their own private IP-VPN networks, I think is also driving up the growth in enterprise quite nicely. Besides mobile, where churn is very low, data growth is growing at over 50% and so on.
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Till Streichert, Vodacom Group Ltd - CFO [38]
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Just on the CapEx question, look, I don't have the number at my fingertips. But in essence, the majority of the CapEx will go effectively to (technical difficulty) you can imagine. Of course, over time, as we move into fixed line, we will direct more of our CapEx into the fixed-line base.
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Shameel Joosub, Vodacom Group Ltd - CEO [39]
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Yes. I think you can work at about two-thirds going into radio and the rest into IT and basically into fiber.
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Myron Vanishavatmin, VIPSA - Analyst [40]
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Great. And if I may just squeeze in one last one. The contract price adjustment, you've said quite clearly it's a once-off. Is that still the case or is there scope for more?
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Shameel Joosub, Vodacom Group Ltd - CEO [41]
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Look, I don't think we want to put prices up. I think basically if there's some technical move here and there, with one or two [players] out, we'll look at that. But I don't think we're going to have an overall price increase through, if you like, in South Africa, that is. In the other markets we've just put another price increase through in October in Tanzania and one in Mozambique.
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Myron Vanishavatmin, VIPSA - Analyst [42]
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Thank you very much.
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Operator [43]
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(Operator Instructions). Mike Gresty, Deutsche Bank.
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Mike Gresty, Deutsche Bank - Analyst [44]
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Hello there, guys. Just a couple from my side. First of all, I just wanted to get a sense of how high you would be comfortable to let your net debt to EBITDA go. If you think of where it is now, and then we've got Neotel coming, potentially spectrum auctions, potentially increased investment into Neotel given that it's been quite CapEx constrained, conceivably could get quite high on you. So you've talked in the past about what your debt funders would tolerate, but I'm just interested in what you guys would be comfortable with.
And then the other, the second question is just concerning costs in the international division. You highlighted ForEx and accelerated infrastructure rollout as some of the reasons aggravating your costs. But you could arguably have made the same case for SA, yet your cost containment in SA has been really impressive, maybe not so much in the international division. What are the differences there as to why you're able to do it better locally than offshore?
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Till Streichert, Vodacom Group Ltd - CFO [45]
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Okay. Let me start off with the first one. So look, we are on 0.7 net debt to EBITDA, and we obviously are comfortable with that. We have equally talked about when we acquire Neotel that we would most likely go to around about 1. If you now ask the question would we go higher? So the key question is of course what you would invest in so that gives you a superior return that justifies gearing up further, we would probably go to 1.5 up to 2 times if it's a convincing case that delivers us superior return. But we will obviously always maintain investment grade. I hope that answers the first question.
On the second question, in terms of cost efficiency program, I'm talking about South Africa and the international, so look, in essence I think we simply have put a lot of focus on the South African operations, where we put what we call our multiyear structure saving program in place, with a dedicated project office, with a lot of commitment from everyone around the Company. There's a lot of best practice leveraging. Taking into account Vodafone and based on a lot of good things that we effectively leveraged off, and we simply added this all up and effectively formed a program and executed diligently and disciplined.
And I think the international operations do have an opportunity on the cost side to effectively take, market by market, where it's appropriate, those examples and those best practice ideas to improve the cost containment or cost efficiency program.
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Mike Gresty, Deutsche Bank - Analyst [46]
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Just to narrow it down, are there any major one-offs? I think you mentioned the DRC number. There's some ForEx losses in there. Or is it more a case of just letting them grow into their markets before you start to really ratchet down on costs, as you appear to be doing in SA?
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Till Streichert, Vodacom Group Ltd - CFO [47]
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Look, I don't think that it is a question of phases that we are in because, remember, South Africa is growing quite nicely in terms of top line. And in combination with the operational leverage that we've put through, we ended up delivering 13% EBITDA growth, which obviously is quite pleasing.
Now I tend to think -- obviously the international markets are, as you point out, in a slightly different space, but I think that it's an opportunity on the -- simply a structured savings program to leverage these things going forward.
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Mike Gresty, Deutsche Bank - Analyst [48]
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Got it. Thanks, guys.
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Operator [49]
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Craig Hackney.
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Craig Hackney, NOAH Capital Markets - Analyst [50]
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Thanks. In the international segment, your other service revenue, up 19.6% year on year, can you just explain the strong growth there, please?
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Till Streichert, Vodacom Group Ltd - CFO [51]
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The international other segment, that will be our Vodacom Business Africa growth that is rolling up into that segment. Yes, it's Vodacom (inaudible).
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Craig Hackney, NOAH Capital Markets - Analyst [52]
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Do you price most of those contracts in US dollars so you get a strong currency impact?
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Till Streichert, Vodacom Group Ltd - CFO [53]
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That's correct. That's correct.
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Craig Hackney, NOAH Capital Markets - Analyst [54]
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Okay. Thank you.
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Operator [55]
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(Operator Instructions). Gentlemen, it would appear that we have no further questions on the conference call. Do you have any closing comments?
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Shameel Joosub, Vodacom Group Ltd - CEO [56]
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Thank you for joining us.
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Operator [57]
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Great. Thank you very much, sir. Ladies and gentlemen, on behalf of Vodacom Group, that concludes today's conference. Thank you for joining us and you may now disconnect your lines.
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