vodacom group limited sustainability report

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untitledVodacom Group Limited Sustainability Report
This is Vodacom’s second sustainability report and covers the financial reporting period from 1 April 2008 to 31 March 2009. References made to ‘this financial year’, refer to the reporting period noted above. Likewise, references made to ‘the prior year’, refer to the reporting period 1 April 2007 to 31 March 2008. We report annually, our previous report being for the prior year. This is also the last year that Vodacom reports as a private limited company, owned jointly by Telkom SA Limited and Vodafone Group Plc. Vodacom listed on the JSE on 18 May 2009, binding itself to the JSE Listing Requirements.
Considering Vodacom SA’s dominance within the Group – its operation serves 27.6 million customers out of a total of 39.6 million for the Group – this report largely covers issues relating to Vodacom SA. Use of the term ‘Vodacom SA’ refers to issues relating to Vodacom SA, while the terms ‘Vodacom’, ‘Vodacom Group’ or ‘the Group’ imply governance of an issue across all our operations.
Other operating companies (OpCos) are reported on in more detail than last year but
not as comprehensively as Vodacom SA. Over time reporting will improve as we expand our sustainability programme to the various OpCos and as our operations grow outside of South Africa. However, South Africa will remain the main focus of the report for the foreseeable future. Considering the recent acquisition of Gateway in December 2008, no significant sustainability information is recorded for this entity this year.
Our reporting process is based on the Global Reporting Initiative’s G3 Sustainability Reporting Guidelines, and we self-declare a Level C GRI rating for this report.
We have not sought to have the report externally assured. We are currently focusing on improving our internal reporting structures as we establish our sustainability programme within the company. We intend moving towards assurance in the future.
For more information about sustainability at Vodacom or queries regarding this report, contact the Group Sustainability division by e-mail at [email protected]
About this report
Contents BUSINESS OVERVIEW
4 Message from the CEO
6 The Vodacom Group business
SUSTAINABILITY REVIEW
14 Earning the trust of our customers and the public
19 Broad-based Black Economic Empowerment
26 A workplace for the highly skilled
32 Health, wellness and safety
34 Broadening the access base for communications
38 Our impact on the environment
44 Radio frequency emissions and health
46 The Vodacom Foundation and Group Corporate Social Investment (CSI)
50 Ethics and compliance
IBC Glossary
CHAPTER ISSUES STAKEHOLDERS AFFECTED
Earning the trust of our customers
Competition and the cost of communications Customers
Public
Government
Regulators
Privacy of customer information
Broad-based Black Economic Empowerment
Employee representation and engagement
EmployeesAttracting and retaining talent
Employees, families and dependents
Socio-economic impact of mobile telecommunications
Communities
Our impact on the environment
Consumption of resources Government
Interest groups, Vodafone
The Vodacom Foundation and Group CSI Leveraging the business to do good Communities, NGOs,
Government
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Vodacom conducted its first independent stakeholder survey on sustainability. We plan to improve our engagement processes further this year. 12
Market liberalisation is increasing competition. Government’s management of broadband spectrum will determine business strategy. Likewise with the implementation of the Regulation of Interception of Communications Act (RICA). 15
We await ICASA’s reissuing of handset subsidy regulations. We are responding to the anticipated Consumer Protection Bill (CPB) with simpler products and services. 16
The introduction of Location-based Services (LBS) has added to the risk of abuse, particularly by Wireless Application Service Providers (WASPs). This year, Wireless Application Service Providers Association (WASPA) has instituted stricter measures to ensure fair business practice, which we monitor.
17
We have policies, procedures and processes in place to ensure that information is not unlawfully disclosed in terms of licence obligations, both internally and via our WASP business partners. 18
Vodacom SA improved its overall BBBEE score according to the DTI Codes from 68.03% to 69.13%. This year we aim to maintain a Level 4 rating. 19
We successfully concluded a R7.5 billion BBBEE transaction in Vodacom SA, representing 6.25% of the company. DTI CoGP score: 6.97/20 20
Black representation among executive directors decreased this year. DTI CoGP score: 6.94/10 22 Submitted the annual EE report to the Department of Labour. We are working to meet race and gender representation targets, specifically at the Executive Head of Divisions and Managing Executive levels. Retention of black employees, and in particular black female employees, remains a challenge. DTI CoGP score: 9.53/15
22
70% of all training this year was invested in the Black Designated Group. DTI CoGP score: 12/15 23 By increasing internal targets, we are driving spend towards smaller entities. DTI CoGP score: 13.69/20 23
Consistent support of our Community Services Operators rates Vodacom SA as a Level 1 contributor to BBBEE. DTI CoGP score: 15/15 24
Our contributions are divided between the Universal Services Fund and direct Corporate Social Investment. DTI CoGP score: 5/5 25
Employee interests are formally represented by a system of local and national consultative committees. There is no formal recognition of unions as less than 12% of Vodacom SA’s workforce are unionised. 26
Vodacom invested R69.7 million in the training of employees, or 3.7% of payroll, and employee turnover dropped from 10.51% to 9.04% year on year. This year we aim to attract and retain more highly skilled people, measured against defined indicators.
28
We appointed a new diversity management training supplier. 31
Changes in leadership and the uncertainty around the BEE deal impacted on employees during this year. In response, we adopted an integrated health, wellness and employee engagement management strategy. 32
50% of Vodacom employees participated in voluntary counselling and testing during the year under review, and 87 HIV-positive employees are on anti-retroviral therapy. 33
While the rapid uptake of mobile phones is evidence of its economic value, we undertake to report any findings of significance to our stakeholders as and when these are published in peer reviewed papers. 34
This year, Vodacom Tanzania extended its network by almost a third, 3G coverage in SA increased from 25% to 27.8% of the population, and WiMAX is being rolled out in key metro areas. 34
Tariffs are reducing (based on the customer’s location and time of day) and Ultra Low Cost handset prices are down by an average of 20%, to between R200 and R300. 35
We introduced three speaking phones to the market, namely the Nokia E51, E65 and N82, subsidising special software that converts the screen display to speech. 37
Following a significant increase in consumption last year as a result of business growth and infrastructure investment, increases this year have been contained by the adoption of a number of conservation initiatives. 38
A policy of sharing infrastructure between operators has assisted in reducing the number of new base stations erected. Local planning regulations provide for community engagement around proposed new masts. 42
We cannot yet accurately measure network equipment waste, but we have redesigned the equipment chain to include a formal system of collection, reuse and disposal. Approximately 12 400 cell phones were recycled this year. 43
Until the World Health Organisation (WHO) concludes its international risk assessment the Vodacom Group aligns its EMF policy with the WHO’s current best practice recommendations. We await the results of an external opinion survey of our engagement with various authorities and regulators.
44
Vodacom SA contributed R67.4 million to CSI in the year under review. This year, we are adjusting our CSI focus to concentrate on leveraging Vodacom’s business skills and technology to improve socio-economic conditions in underprivileged communities.
46
Our Ethics Along the Way Programme assesses ethics risks and strengthens our ethics through our Group Code, training and ethics institutions and champions. Likewise, our Anti-CMT Compliance Programme is implemented across the Group. This year, senior ethics and compliance officers were deployed to mentor and assist local ethics and compliance officers in Vodacom Mozambique and Vodacom Tanzania.
50
Message from the CEO
What makes a company like the Vodacom Group sustainable? Our long-term survival is not protected by a constitution; there is no law that says we have to survive. As a company doing business, we have to earn the right to exist. And we can only earn the right to exist if we continue to meet the expectations of our stakeholders.
No matter how much the world changes around us, this basic law of survival does not change. In the past six months, there have been many significant changes in the world. The financial crisis has changed the way business works. We could even argue that some businesses lost their right to survive when they stopped meeting the expectations of their stakeholders. There are valuable lessons to be learnt from this.
In our own environment there have also been dramatic changes. With our listing on the JSE in May 2009 we now have more than 95 000 new shareholders who have invested in Vodacom because they believe in our sustainability. Our majority shareholder, Vodafone, has also shown confidence in our sustainability by investing R22.5 billion in their additional 15% share, especially as this comes shortly after the biggest financial downturn in decades.
Now we have an even bigger responsibility, not only to survive, but to be successful and generate healthy profits for our shareholders.
As Vodacom goes towards the future, our sustainability has to be built on sincere engagement with our stakeholders. We need to identify, understand and respond to the issues and needs that are important to our customers, shareholders, business partners,
employees, government, special interest groups and the general public.
To ensure that these issues and needs are addressed at the most senior level of management, we have established a Group Executive Committee (Exco) representing every area of our business. Three members of Exco, Shameel Joosub, Johan van der Watt and I, also serve on the Vodacom Group Board to ensure consistency between board and management decisions and actions.
A number of important sustainability issues are raised in this report, and I would like to highlight three of them.
1. We will be in business as long as our customers and the public trust us. It is as simple as that. We have to continue earning this trust and safeguard it as our most valuable asset. This includes our stakeholders’ trust in our way of doing business, their trust that what they are paying for is what they are getting and their trust that Vodacom will protect vulnerable users.
As our environment becomes more competitive, prices come under pressure and our market share is under attack, we must respond to the best of our ability, but never at the cost of our biggest asset – the trust our stakeholders have in us.
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Sustainability Report 2009 5
2. In South Africa, Broad-based Black Economic Empowerment remains one of the most critical sustainability issues. Fifteen years into our democracy, we cannot afford to lose sight of the fact that our society is not yet fully inclusive, that millions of South Africans remain poor. Vodacom is a powerful enabling agent in our economy and our Broad-based BEE efforts can have a positive ripple effect to the furthest margins of society. And the more people flourish, the more it will improve our own sustainability. As an independently verified Level 4 contributor, Vodacom SA is committed to improve against each of the prescribed seven elements.
We are also in the ideal position that we can empower communities through technology, enabling them to cross the digital divide and access opportunities such as jobs and education that can drastically improve their lives.
3. Our employees are an important stakeholder group and the one most directly responsible for our sustainability. Our goal is to create the best working environment for the most highly skilled and motivated employees in the industry. Last year Vodacom invested almost R70 million in employee training, representing 3.7% of payroll, while the employee turnover rate improved marginally.
I am determined that we will further improve internal engagement with employees and attract and retain highly skilled people who are motivated not only to meet our stakeholders’ expectations, but to exceed them.
If we earn the right to exist by meeting our stakeholders’ expectations, we need to know what those expectations are. That is why sustainability is crucial to our future. We have identified the sustainability issues that are most important and outlines the areas where we can improve. The priority areas are the way we manage business relationships, establishing critical indicators of performance and measuring improvement.
I look forward to a year of strong progress as we improve in the critical areas we have identified, while building on Vodacom’s strength as a trusted brand.
Pieter Uys Chief Executive Officer Vodacom Group Limited
Sustainability highlights • Group Executive Committee responsible for sustainable development
• First independent stakeholder survey conducted
• Vodacom SA’s Broad-based Black Economic Empowerment (BBBEE) score for the DTI‘s Codes of Good Practice (Codes) increases from 55.24% to 68.03%, improving the company’s rating to a Level 4 contributor
• Vodacom SA concludes R7.5 billion BEE transaction, in terms of which YeboYethu Limited owns 3.44% of Vodacom SA
• More than two million affordable handsets (under R300 each) sold by the Group
• Vodacom SA launches handset recycling programme, with 12 400 handsets recycled in the financial year under review
Sustainability Report 2009
The Vodacom Group business
Products and services Vodacom offers a wide range of communications products and services over a variety of technology platforms to consumer, corporate and wholesale customers. Although differences exist within each country in which Vodacom operates, the main services and products we offer are:
• Voice
• Converged services
We continue to adapt and develop our range of products and services in order to attract and retain customers and increase average revenue per user (ARPU).
Voice Mobile voice services are the largest contributor to Vodacom’s revenue and include revenue generated by customers from outgoing and incoming traffic, international roaming, incoming visitor roaming, national roaming and carrier voice services.
Outgoing voice traffic Vodacom had 35.3 million prepaid customers as at 31 March 2009, comprising 89.1% of the Group’s customer base. Prepaid customers are charged for voice services on a per minute or per second basis and do not pay a monthly subscription charge. Prepaid vouchers of various value denominations can be purchased from a range of retail outlets, physically and electronically across all of the countries in which the Group operates.
Vodacom had 4.0 million contract customers as at 31 March 2009, comprising 10.2% of the Group’s customer base. Subscription-based mobile service packages, tailored to individual country markets, include hybrid contracts (fixed value which can be topped up using prepaid vouchers), standard subscription packages, business packages, and packages targeting the small and medium enterprise market. Contract subscription is typically for an initial 24 month period with monthly subscription and call charges varying with each package.
In 1996 Vodacom SA developed community service telephone units designed to be used in communities which had limited access to telephone services. This
Vodacom’s strategy is to be a leading provider of total communications in sub-Saharan Africa, and in so doing, democratise access to world-class communications.
Group highlights • 16.5% growth in customers to 39.6 million
• 10.5% growth in EBITDA to R18.2 billion
• 28.8% growth in data revenue to R6.4 billion
• BEE transaction completed in South Africa in October 2008
• Acquired Gateway on 30 December 2008
• Listed on the JSE Limited on 18 May 2009
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Sustainability Report 2009 7
has now developed into a successful business model and has been introduced into our other countries of operation. Vodacom had 284 401 community service telephones, comprising 0.79% of the Group’s customer base as at 31 March 2009. Community phone shops are run by entrepreneurs and some offer complementary services including internet and e-mail access.
Incoming voice traffic Vodacom earns revenue when calls which originate outside of its networks terminate on its networks. These termination fees are either negotiated between telecommunications operators, or based on rates determined by local regulators. Vodacom has entered into interconnection agreements with fixed, mobile and value added network services (VANS) operators in each of its countries of operation.
International roaming Vodacom offers its customers international roaming services which allow customers to make and receive calls whilst travelling abroad by using the networks of operators with whom Vodacom has entered into international roaming agreements. In addition to allowing Vodacom customers to roam whilst travelling internationally, Vodacom generates revenue from other international mobile network operator (MNO) customers roaming on its networks.
National roaming National roaming agreements unilaterally enable the customers of third parties to make use of Vodacom networks to make and receive calls and to access other telecommunications services. Vodacom SA has a 15-year national roaming agreement in place with Cell C, which is terminable on or after 14 November 2016. Vodacom SA charges a fee to the third party based on the volume of traffic, subject to a minimum fee, which is originated by customers who are roaming on Vodacom SA’s network.
Carrier voice On 30 December 2008, Vodacom Group completed its acquisition of Gateway. Through Gateway’s carrier services business, the Group offers inbound and outbound connectivity as well as domestic backhaul services to telecommunications operators in Africa.
Mobile messaging Vodacom offers its customers mobile messaging services such as SMS, MMS, premium rate SMS (including USSD) and MMS, SVS, bulk SMS and MMS and WAP services. These services are charged on a different basis, subject to the terms of the customer’s package.
SMS The Group’s primary messaging service is SMS, which allows customers to send and receive short
text messages on mobile handsets and various other devices. In 2000, Vodacom SA launched the USSD- based Please Call Me service, which enables a customer to send a free SMS to another person to ask him/her to call back. Vodacom SA now transmits approximately 20 million Please Call Me messages per day. These messages facilitate a call back from the recipient that generates revenue for Vodacom. The Please Call Me messages include advertising messages.
SVS In October 2008, Vodacom SA launched SVS (short voice service), which allows users to communicate by means of sending and receiving voice messages with a maximum length of 30 seconds. Within two months from launch, more than 1.6 million customers used this service. SVS provides customers with the flexibility of communicating in their preferred language and does not require sophisticated handsets or complex downloads.
MMS MMS messaging offers customers with compatible devices the ability to send and receive multi-media messages, such as pictures, music, sound, video and text.
Premium rate SMS and MMS Premium rate SMS and MMS content is largely developed by WASPs and focuses on competitions, sports, news and alert services. Revenue is shared with the WASPs.
Broadband data and connectivity Vodacom offers broadband connectivity and internet access services in all the countries in which it operates, using various technologies, such as, GPRS, EDGE, 3G, HSDPA, HSUPA, WiMAX and VSAT.
In December 2004, Vodacom SA was the first operator to introduce a commercial 3G product in South Africa. The number of active 3G/HSDPA handsets on the South African network as at 31 March 2009 was 2.8 million. In March 2007, Vodacom Tanzania launched a 3G offering in Dar es Salaam and by 31 March 2009, more than 331 000 3G devices were registered on the Vodacom Tanzania network. Vodacom Lesotho is currently rolling out WiMAX and 3G broadband access in certain key areas.
The acquisition of Gateway reflects Vodacom’s strategy to reposition itself as a leading pan-African provider of communications services.
Pieter Uys, CEO Vodacom Group Limited…