Vodacom Group Limited

Thank you. Good afternoon, everyone and good morning to those joining the call in the U.S.

I'm joined by Sitho Mdlalose, our Interim CFO and Shaun Biljon, our Head of Investor Relations. During quarterly results, we will only focus on revenue and key performance indicators today.

As with prior quarterly results, Safaricom does not report earnings performance so we will therefore not be disclosing an update on their results during this call. Our results for this quarter were impacted by the COVID-19 pandemic both positively and negatively.

The South African business was resilient and delivered strong growth in service revenue, despite the price reductions introduced on 1st of April. Our international operations are however impacted by the lower economic activity, free or discounted peer to peer transfers in M-Pesa and customer registration requirements in Tanzania.

Having a diversified portfolio resulted in the group benefiting from currency changes, pushing revenue up by 5.6% and service revenue up by 7.6%. Normalized growth was 1.3% for revenue and 2.6% for service revenue.

Let's take a look at the South African segment. Service revenue increased 6,4% driven by strong customer revenue growth of 4,3%.

This was supported by the good uptick in data demand with this increase usage offsetting the impact from a price reduction on our 30-day bundles from 1st of April. The demand for data increase in the quarter as people worked, entertained and studied from home during the various phases of the lockdown period.

Data traffic doubled in the quarter and usage per smart device grew 75% year-on-year and 22% from the March 2020 quarter to 2.2 gigabytes per user. There are now 13,2 million 4G devices connected onto our network, an increase of almost 30% year-on-year.

The overall trends in the contract customer segment improved with revenue growing at 3,4% and customers up 2.9% to 6.1 million customers. We offered a number of data products to support businesses to work from home and to assist schools and universities to continue education initiatives.

Performance in the prepaid segment also improved with customer revenue growth of 5%, a significant growth in ARPU of 20.8% was aided by the lower customer base in the quarter due to store closures and movement restrictions, which led to decrease in gross connections during the period while we would still have had the churn from prior periods taking effect. The higher spend is partly due to telcos benefiting from a larger share of wallet during the lockdown period and our deliberate approach to increase active days and pick up opportunities specifically around working and educating from home.

Our growth in data bundle sales were driven by both lower data prices during the quarter and lockdown related increase in demand. Following our price changes since the beginning of the year, we noted most customers continue to spend at the similar or better levels than previously benefiting from higher allocation of data at these price points.

On enterprise and wholesale segment which now counts to 27,2% of service revenue, thus grew by 13,1%. This was driven by an increase in the take up of MBB contracts and APN access as well as national roaming revenue.

Please be reminded that, from next quarter, the transition between roaming partners will be in the base so growth will be moderated during the year. We were able to increase our homes and businesses connected to just over 79,000 up a 121%.

Financial services recorded R540 million in revenue in the quarter growing by 10.9%. The airtime value by the app almost doubled from the last quarter as customers are using this more convenient means to recharge and make bill payments.

We advanced R2,8 billion revenue in airtime via the Airtime Advance platform to 9,3 million customers, 38% of all recharges happened through Airtime Advance. Insurance growth continues with revenue increasing 8,2%.

We also entered into an exciting new partnership with Alipay to further the financial services strategy, which I will talk about towards the end of the call. Our international operations were impacted by the subdued economic activities as a result of slowed trading activities during the pandemic.

We also discounted peer-to-peer services in M-Pesa to enable social distancing as a method of contactless payment, which had an impact on M-Pesa revenue growth. In Tanzania, the barring of services to customers due to the biometric customer registration requirements in Q4 last year impacted its service revenue growth as expected.

Data continues to perform well supported by network investment and the expansion of 4G. This culminated in service revenue growth of 10.7% for the portfolio, emphasizing the rand and its benefits from these operations despite a decline of 5,3% on a constant currency basis.

Our international operations contributed 30.2% to group service revenue. Data customers increased 5,2% to 20 million representing 53% of our customers with data services.

Data traffic was up 44,3% in the international segment, driven by the need to work from home. Mobile financial services revenue from M-Pesa reduced in the quarter due to low economic activity and movement restrictions in several of our markets.

Active M-Pesa customers increased by 3,5% to 14,7 million. M-Pesa revenue grew 17% and declined 3.1% on a normalized basis, representing 18.7% of service revenue.

We expect this to recover as free services are reduced during the next couple of months and economy start recovering. We’ve processed $3,5 billion in value of M-Pesa transactions per month during this quarter.

As a reminder that these M-Pesa numbers exclude Safaricom so this illustrates the scale of what we have on M-Pesa outside of Kenya. We invested R803 million in capital expenditure in the quarter as we expanded our 4G rollout, we now have just over 2,940 sites across our international operations.

Before I conclude for questions, I'll just give a quick update on some of the regulatory matters. One of the most pertinent issues in Tanzania has been biometric customer registration.

After barring 2,9 million customers last quarter, we reconnected 745,000. Since April, the Tanzanian Regulatory Authority suspended further services barring due to the COVID-19 pandemic.

Currently, we have 1.9 million SIM cards generating more than 4 billion Tanzanian shillings or almost R30 million per month that remain non-biometrically registered. We await further instructions from the TCRA with regards to the barring of services to the remaining non-biometrically registered SIM cards.

There were further regulations on SIM card ownership on the 1 July, 2020 the TCRA issued a public release that required customers who biometrically registered more than one SIM card by service provider to verify the SIM ownership by 31 July, 2020 through their mobile phones. A customer may request an approval for additional SIM cards to service providers, retail outlets and we've just gone live with an automated USSD solution where customers can initiate the approval from their phones.

This is a better process in the manual process of visionary visit and a better outcome than what was originally anticipated. In South Africa, to support the increase in network demand, we also allocated temporary access to spectrum, which is available until the end of November or can be extended until just before the auction takes place.

We've used the temporary spectrum to alleviate capacity issues where possible and the 3.5 gigahertz allocated spectrum to fast track our 5G launch and support the initial rollout. This is assisting us and getting real world learnings of this new technology before permanent spectrum education later in the year.

ICASA is also making progress in allocating high demand spectrum by all accounts from public statements made by them. They are still aiming to complete this process by the end of the year, while the one licensing will only happen in the following year.

We expect the ITA in the next few weeks which will provide more clarity on the spectrum lots and pricing. And finally, I'm happy to announce our partnership with Alipay to launch a super app in South Africa, which will allow customers to pay via the app, make peer-to-peer money transfers all via the app, invest, do online shopping, stream music, watch movies, play games, book travel -- book traveling, movies, health, taxis, and Uber's without leaving the app.

All enhanced with enough advertising, promotions, gifting and more. This is the first time Alipay with 1,2 billion users worldwide has partnered with a company they don't have equity in.

Overall, this will help us to accelerate our financial services strategy in South Africa. This concludes my comments and Sitho and I are now ready for any questions.

Hi, morning, sorry afternoon, Shameel and team. Just three quick questions from me, non-service revenue can you give us a bit of color of what's in there and what's driving -- sorry not non-service revenue, sorry what’s other non-service revenue.

What is driving that 76% increase and what is in those numbers? The other two questions I have, one is; can you give us some color on what happened to voice usage in the quarter considering this was the first quarter reported in South Africa lockdown, so what has happened there?

And then the last question is can you tell us how much Enterprise is contributing to South Africa's service revenue in these quarterly numbers? Thanks.

Hi. Thanks for the question.

So, non-service revenue is really driven by two elements. So the first is we had a 22.5% decline in our equipment revenue which was as a result of lower sales during the lockdown periods on our handsets that did pick up towards the end of the quarter.

So we're happy with our exit rates. And the second element of that which partly offsets if you're looking at that from a quarter-on-quarter basis is an increase in our site rental, which is coming through from higher sites on that Rain have with us, we've moved up from about 3,100 sites in prior quarter to 5,300 sites.

On voice, what we saw is firstly, as we went into lockdown in April, we saw voice dip slightly, however post that, what we've seen for the quarter as a whole is that voice did pick up and on a year-on-year basis for Q1 our voice revenue was up 5%.

I think the important part is that we in the months of May and June, we saw our highest voice revenue than we had for a period of over 17 months. So, for some reason, people decided to talk a lot in May and June and that seems to.

So in April they weren't talking as much, but then they suddenly started talking a lot more in May and June. In terms of Enterprise, the Enterprise in wholesale segment constitutes 27.2% of service revenue in the quarter and that grew by 13.1%.

Remember, in those numbers is also the impact of the roaming revenue, which came in from July last year or the uptick of having telecom fully on board, came in for July last year. So the numbers in the quarter both for Enterprise and overall is boosted by that, so the growth rates will taper down slightly by about 1.3% as we go into the following quarter because of the lapping of roaming revenue.

Thanks very much gentlemen.

Hi. Good afternoon.

Just to follow-up on this non-service revenue growth, which I think was 76% and you mentioned Rain and the increased stock rollouts. Should we expect a similar kind of increase in the cost of roaming and going forward as you experienced in the revenue line?

That's question one. And then, just want to get a sense from you on the CapEx side with the data traffic growth, what's capacity looking like, and does it affect your absolute Rain CapEx envelope for the year?

And then just one other thing was the prepaid subscriber numbers declining from the daily active users were stable or slightly up. Should we expect lower subscriber acquisition costs as a result of declining gross connections and is this kind of a change in how connections are churned in the market or is it just a lockdown impact?

Thanks, I'll take those. I think with Rain, what you will see while we have the other revenue and other income, we’ll equally have costs coming through -- a cost line flying through on direct costs, which largely from an EBITDA perspective will be neutral.

However, it does provide a slight drag on margin and potentially something around north 0.3 percentage points on a full year basis in terms of the incremental Rain sites that we've taken on. With regards, the prepay, what we did see was ultimately as Shameel said towards the starts of the lockdown period, due to some of the mobility issues, store closures, etcetera, and you did have low gross additions and as a result that does give us some of the acquisition cost savings.

However, what we have seen as all of that starting to come back sort of May into June and July looks fairly strong as well. So the exit run rates are back to sort of normalized levels of what we'd expect on our gross connection.

On prepaid, on the contract, it’s still slightly lower but we’re also seeing lower churn than what we would normally experience across the base. Also important to note, when you look at the customer base and why it's down is because remember you've got this high gross effect, and what I call the washing machine part.

What COVID has done is out to solve some of those issues. Although you have the churn coming through from previous quarters, the lower gross will also result in lower churn in the later quarters.

So you had less shall we say fictitious sums. And therefore you've also seen a nice jump in the -- so firstly, sorry firstly important to note that the 30-day active customer base is continue to increase, that's one, as you would have seen in our announcements and so that's the one part.

But also, it's given a rise to a jump in ARPU of 20%.

So as you say, these gross connections coming down, I mean, should we -- could they be low as probably acquisition costs going forward? Or was that not a permanent feature of the market now?

No. So what's happened is you’ll have a -- but a lower gross connections in contract.

But what we’re also doing is make sure that we’re increasing our in-contract customer base, which then also has an impact on churn reduction. And so what we saving on the one side, we’re investing into retention to make sure that in the end we have positive customer base growth.

Got it, thanks. And then just to follow up on the data traffic impact on CapEx.

So your CapEx for the year will probably be at a lower rate than the normal CapEx that we invest in South Africa. Specifically, we've toned down the CapEx little bit this year, given some of the pressures on or rather some of the issues that we were anticipating with COVID that so far hasn’t materialized.

All right. And so your network capacity is fine despite the traffic growth?

Yeah. So capacity wise, I mean we basically front ended some CapEx investment to make sure that we could cope with the capacity.

And we're using a combination of, of course, additional CapEx investment or let's say our normal CapEx investment for capacity. We’re also using the Rain spectrum or the Rain roaming if we can put it that way, and we’re using the temporary spectrum well to cope with the additional traffic.

All right. Thank you.

Just to add to that on the CapEx equally in this quarter, just a reminder we have invested to ensure that the availability of our network remains high. So a lot since our battery rollout program to ensure that we can cope with any further issue on load shedding period.

Thank you very much for the call. Couple of questions, firstly, how do you see competitive environments during Q1?

Has that become more rational and is there any increased competition as lockdown measures are lifted? And secondly, on your opportunities with regards to their Alipay agreements, what are the couple of most exciting pillars within that agreements in your view and would you expect any impact to be visible already in the near to medium term?

Thank you.

Okay. So I think on the -- so in terms of competition, I think a lot more rational.

I mean, firstly, as an MTN having both reduced prices, I think we both have to deal with that issue. COVID gave us the invoke -- I call it invoke elasticity okay so normally remember what would happen is you would go negative and then you recover it over a period of four to five months, you try and get that usage back.

COVID is at the effect of despite the price drops, giving us enough traffic increase to offset those impacts. So, that was quite positive and quite strong.

And yeah so in terms of -- but generally the market seems to be a lot more rational in terms of during this period Telkom has actually some put prices up and solved the I think gadgets issues, so no more aggression or no more, let's say aggressive offers or anything coming from that part. Also remember as an MTN, we have moved the level down in terms of pricing.

So any pricing gap that would have existed has been narrowed between us and the smaller competitors. So that's one.

And I think that probably played in our favor as well during the quarter being more competitive during a crisis, I think is turn out to be a very good thing. In terms of the Alipay agreement, I think hugely exciting for us in terms of that we now have access to the best tech in the world.

And this super app will have the ability to aggregate a lot of the data different services, from the app you pay, you lend, you'll save, you'll invest, you’ll get entertained. So, the way to think about it is multiple different merchants exposing their services through the app, it will be zero rated with India.

And you'll be able to access all kinds of things. The beauty of the service is that you never leave the app.

So we haven't done a deal with Uber yet but just using Uber as an example, you'll be able to book an Uber from the app itself without leaving the app. You'll also be able to do, if you don't have money, we could advance you the Uber Ride.

So these are the type of services. Payments and lending will be into everything.

But it's a full ecosystem and lifestyle app. Very interesting.

If you haven't had exposure to Alipay or WeChat Pay, interesting to download one of those or Paytm which is an Alipay partner to actually see how the app works. So you'll shop -- you'll also shop from the app.

So your online shopping, everything from clothing to groceries to merchandise will be done from the app itself. So a very, very rich ecosystem all boosted by very good data analytics, pop up promotions, gifting.

So it's got a -- we did some serious homework in terms of identifying what the best tech is and then decided to implement the full platform in South Africa. And we're looking at implementing elements of the platform on top of our M-Pesa platform as well.

Okay. Thanks very much.

Good afternoon, guys. Great update.

My question is, I guess probably a little bit harder to even know what the answer is. But let me just try.

I mean, you've had this benefit now over the past quarter of COVID, with people working from home and traffic almost exploding in your network. Now, I mean there's this other leg that you talk about, which is the economic leg, where people don't have jobs and don't have income and you don't know when that is going to come through.

But you’re ahead, call it a few weeks of the economies sort of like opening up and all of that. So my question is, have you seen like a slowdown or for almost like a cliff in terms of traffic or in terms of ARPUs, which gives you an idea of what's going to happen over the next few months, given the fact that the wallets or the computing services for the consumers wallet will also increase over as we have opened up.

So, just maybe a bit of kind of how you are thinking about it in terms of the economic challenges?

I think with caution, and what I'm going to say now, I will caveat with word "caution" in inverted commas. So while we've seen so far in July is not a slowdown, okay.

The trend seems to continue. That said, remember that you have back out about at least 1.3% of roaming benefit in the quarter, that's one.

But I think the important thing is so far so good, trends are continuing. There will be and I think it's also important to just note a few things, I think consumer wallet spend, what's changed is where people were spending the money on travel and driving to work and these type of things, the new modus operandi of staying connected is data.

So you have to connect somehow and to connect to the world and be able to continue to work. So that's the positive part, I think.

And from that perspective, I think it's been strong. What we’ve also done I think proactively from the start is look around -- look at the opportunities around the pandemic.

And one is what I call hyper personalization. So segmenting the base a lot more understanding if a person is 10 days active, 15 days active and we’re busy implementing this across all the markets and then more targeted, network segmentation and offers to those customers.

Also products like Airtime Advance is now 38% of our revenue, also, half of the people who are using Advance as to access Airtime. So, it's been very positive in that respect.

And we try and make sure that we find new initiatives to continue some of the momentum. I caveat quite heavily because you don't really know what's going to happen on the positive front, alcohol being banned is positive.

Some of the social grants benefits that have been given to people is positive. The interest rate continuous cuts, including the ones today is positive.

On the negative side, job losses. I would say it's probably the biggest impact and what would that impact really be, so I think we are claiming a bigger share of one at this stage and hopefully that continues.

Yeah, so we’d like to we kind of making sure we can pick up all the opportunities around it but yeah, it's a little bit uncertain storm to be honest.

Okay just a follow up on that, maybe if you can maybe comment just roughly what sort of the debtors or the contract book in terms of cancellations and non-payments that sort of thing and then lastly, what do you think is your sales team going to come through in terms of roaming I mean the way rumor was that that you might get just maybe an update on that? Thanks.

Thanks, thanks. Maybe let me take the first one on bad debt so I think what we're seeing is obviously quite a lot of pressure on particularly in the Enterprise segments on small to medium enterprises, so obviously they have suffered quite a bit under the lockdown regime.

So, a few of those who haven't been able to trade in various sectors are obviously under massive pressure, but we’re seeing that pressure coming through in terms of ability to pay. We're obviously working with all our customers in trying to set appropriate payment plans where possible and see how we can be creative around ensuring that they're able to continue to receive the services that they require to get back on their feet while making it sustainable for them to play in the long term.

On our consumer customers we have noticed a slight increase in pressure on settling accounts, it's not incredibly higher than our expectations at this stage but we expect it will play a little bit of the feature as we go into quarter two and as we close H1.

What was the second part of your question, [indiscernible] sorry you weren’t clear.

It was subsea roaming agreement whether you’re going to get more out of it, I remember there was a talk that you might or just maybe an update of where that is?

Yeah, I think on the subsea platform is quite open at this point so once we’ve got update, I think we’ll go to the market on that deal where we’re reaching at.

Okay, all right thanks guys.

Hi thanks for the opportunity and I had a question on Alipay partnership that you’ve announced. Is that maybe just actually have you done it between South Africa entity and Alipay or is it something that you're doing via M-Pesa Global?

And how are you thinking it's interesting that you having the M-Pesa as a tool for B2B and everything you're going for a very picky franchise, is there, do you see an opportunity for M-Pesa maybe to learn and about some of the tech side from the partnership you’re announcing maybe actually kind of could become -- whether you see this as an opportunity for M-Pesa to step up on the technological side as well? Any color would appreciate it.

Okay, so yes perfect. I think two-fold, one is remember now M-Pesa is now jointly owned by Safaricom and Vodacom.

We bought that from Vodafone and effectively that's -- or that's where we develop the central product roadmap, optimize, get back and so on, yeah. So that's the first part.

The second part is the deal that is being done is South African deal and not for M-Pesa, but there will be elements that will be used in M-Pesa and that explain the difference why. So, but let me first explain what we've done, so in South Africa of course what the way we've structured the deal is by as you say putting in the best deck but this opens up a lifestyle platform and a super app capability which is now what M-Pesa does today.

The difference between the two, this is an open service I call it like an iOS or a Googlestore with multiple different players selling their products through the platform and you’re always taking your cut, if we can put it that way, yeah. And it's a very rich experience, highly data analytics and so on.

So part of the logic is that we try this service in South Africa first and we go for the full because we didn't have an M-Pesa platform in South Africa which is much easier to do the transition to say let’s implement a full platform, also smartphone penetration in South Africa is a lot higher. Now what we've been doing over the period over the last two years is also by building some of the underlying capabilities that will form and help complement the end platform.

So example is, we've launched VodaLend, another example is that we have our own Android point of sale devices in the market from which you can lend from the device -- you can from lend the device and so on and most importantly you can do QR payments from the device. We have our own payment gateway that we've established so these things help to create a lot of the success.

And of course, we’re now building all the lending products and options and so on from that. So that gives us the ability to leverage this platform given the smartphone penetration in the country a lot higher, so that's the one.

The second part is on M-Pesa, what we've done is firstly, we want to upgrade the current platform from what we call G2 to G3 which is, it's a Huawei platform that will be upgraded and then effectively on top of that, we will then implement what we call the Mini apps capability from the end platform or from the Alipay platform and that will give us a similar type of experience to what we have in South Africa. But also it'll also give us clear learnings if the platform works let's say, we can then share best practice between the two and I think that's going to leave us into a very good place but also I think the way to think about it is what we do in South Africa is with the evolution of M-Pesa will jump to, which has whole lifestyle capabilities.

Okay, so you just say, just to confirm so for the addition for M-Pesa is still to have it as a product across the parent for East Africa footprint or a parent footprint and it will move it into more open and lifestyle product in future?

Correct. So M-Pesa will involve to what we’re launching in South Africa, right.

So, I mean we're involving M-Pesa of course the lending but all of those things like Songesha and Fuliza we’re now launching in all the markets over our facilities, expanding our merchant capability in all the markets and so on. But we’re using the lifestyle full a platform capability that we’re launching in South Africa, almost is a learning to what we’re going to do with M-Pesa in the rest of the markets but we see it going the same way, open thousands of vendors selling through the platform as opposed to what we do now which is we have a few vendors for each service.

That’s helpful. Thank you very much.

Hi. I just have maybe two questions, one is, a clarification on the voice revenue trends in South Africa.

If I heard it right was it 5% year-on-year growth in terms of the voice revenues? And regarding that, what are you seeing in terms of the voice trends starting from July and how do you think that things will pace out for the year?

And secondly on Alipay, is there something more that you can add in terms of economics or how we would monetize the partnership? And also, I mean, how should we be thinking about I mean the logistics side of the probably when you start -- when you put in all these super -- within the super app and you put in all the applications of e-commerce or M-Commerce is Vodacom also talk, I mean thinking about let's say going into logistics business?

So let me start with that one. No, we're not going into logistics, and so on.

It's a marketplace actually. So what it what it does is so I mean firstly, like all your online platforms will be able to sell their products to the platform.

You'll be able to see, look at a product, look at the advertising about product, see a video on the product and then decide to purchase the product but also lend against the product, okay. So you'll be able to pay it off in installments and that type of thing.

So that's the one. The actual delivery and so on still happens through that channel and I think through the particular retailer and so on.

So example would be if you had a grocer like say Pick and Pay or all these on the platform, they're ordering everything will go through the platform. So it's essentially creating a mini app, which allows them to expose all their products within our platform and create experience where you don't leave the platform.

The actual deliveries and so on will still be done by the respective partner. And these are proven used cases that are being adopted across Asia, through the Alipay.

Remember, they've got multiple countries in which they've launched Alipay into with different partners from India to Pakistan, to Bangladesh, to Korea, to Thailand and so on and so on.

Sunil, we don't disclose the separate revenue lines anymore in terms of revenue and data since we know it’s 5.15 but Sitho will just give you some cut on the voice revenue, a bit up the voice traffic trade that he was discussing earlier.

Yes, sorry Sunil that 5% is actually voice traffic has gone up 5% for the quarter. So that's really obviously from sort of got stronger in May and June and quite weak in April.

But we came back and rebounded in May and June. So that's on voice traffic, the 5%.

Sure. And, I mean, what have you seen starting in July in terms of how voice traffic is shaping up?

Any color on that would be useful? Thank you.

Yeah, it's still early. But I think what we're seeing is we're seeing the trend holding on voice traffic.

And I think both on voice and data, we seem to have reached a bit of a plateau in terms of the initial growth that we took on pre-COVID going into -- sorry, pre-lockdown going into lockdown. So the trends are holding, but still that is sort of I call it kind of 20% above your pre-lockdown volumes.

Sure, thank you.

Hi. This is [Indiscernible] from Oasis.

And I have two questions. My first question is regarding, if the services of Alipay will be rolled out to all the markets of Vodacom or are these being rolled initially in South Africa only?

And my second question is it is going to cannibalize the existing user base of M-Pesa and revenues of M-Pesa and if there is a figure that you can provide with the cannibalization of the existing users base or deleverages? That’s it.

Right, if I understood was the line was in ATA, if I understood the question it was is Alipay being rolled out to all the markets one? And…

Yes, yes.

And two you were worried about the revenue cannibalization on the services, is that right?

Cannibalization cost with the M-Pesa services of Vodacom via the Alipay services?

Okay, okay. So just to be clear, the Alipay services are not being rolled out in the other markets.

And just to be also clear that no revenue shares on this, it's a pure vendor agreement where it's basically software and effectively what the normal bunches of software maintenance agreements around it. So there's no revenue shares whatsoever in South Africa or the international markets.

The full platform will be rolled out in South Africa, elements of it or specific services which is, of course, much cheaper and so on. But again on the software purpose will be rolled out to M-Pesa.

So there's no cannibalization of revenue, and there's no revenue share with anybody, whatsoever.

Okay. Thank you.

Hi, [Indiscernible] are you there?

Hi, guys. Thanks for the opportunity to ask questions.

Only I have one question, just trying to understand this interesting opportunity with the lifestyle platform in Alipay. Can you just elaborate a little bit more because you might have mentioned it in answering the earlier question?

But the question weren't that clear to me. So, is it still branded for the pay or what happens to VodaPay in the meantime, because it sounds like you buying the software only from Alipay?

It's still a Vodacom subscriber app, if that makes sense? And is it exclusive to Vodacom?

I mean, so you want to take a cut from anyone who wants to use the app, I presume? Or are you only providing this as exclusive app for Vodacom and just a little bit more about the app, if you don't mind?

Thank you.

Okay. So the firstly, I mean, it's a software arrangement with them.

And effectively, you're right in saying that we just get into technology from them. While the brand will still be VodaPay, but it will be a new VodaPay.

But obviously, what we have today is more a payments app or simplified payments app like we're moving towards is a lifestyle app, where everything comes together in one platform. And I think what we launching more than the app is a platform, okay.

And therefore, the richness of it will be there, in a way you make money from it is basically there could be free revenue streams. We still will be finalizing that but obviously payments if you're going through it, we’d want that you use our payment gateway and so on.

That's the first part. Secondly, the lending opportunities that that will provide.

And thirdly would be an agreement between the vendor that when they sell with a merchant when they sell their products through us, we get a small cut. In return, they obviously -- they get the richness of the data analytics, daily offers, promotions, gifting, very sophisticated data analytics, that will tell the customers what to buy and when and so on and so on.

And I mean, if you -- it's quite a -- for us, we see it as a game changer. And if you see, if you've been to China and you trying to use a card or you're trying to use cash, you then quickly get to understand what the power of these apps are.

Because people just don't accept cards and they don't accept cash. So it's a very I would say, it's transformational and very big in terms of the lifestyle services that will go through the platform itself.

So, a big change from the current one to where we're going, the current one to be honest was more, we've been working on this for the last two years. It's the first time that they've done it with a partner where they don't have equity in every other instance, they have equity in those businesses.

And yeah, so we've been working with it, the current app was more learning experience for the ultimate solution, which is what we are now going to launch. Just to manage expectations, the launch will probably be in Q4, yeah.

So, we have only announced the path. Now all the hard work starts and we were basically making sure that we build everything.

I mean, we have a team of a 100 people, mainly software engineers that are working on the solution.

So, it sounds like an exclusive product for Vodacom I mean…

Sorry to be clear, it's exclusive. The relationship with end is exclusive to us in South Africa, okay.

So it's completely it's exclusive from that perspective. That's one.

And two is the service itself will be available to Vodacom customers and non-Vodacom customers.

Correct.

But of course, if you're a Vodacom customer, you'll get free, you’ll get these app zero rated. If you're an MTN customer, it will be sorry for you.

So, just following up on that, right, how does the user get money into the system? Is it similar to how it works in China, India or is it slightly different I mean, we have a quite an entrenched banking system in South Africa and salaries go into the banking system?

So, just your thoughts on that and I'll leave it there. Thank you so much for answering.

So, you will have a linked card initially, so you can link a card, you'll have a virtual card that you could apply for as well you'll be able to directly link it into your bank account. And shortly after launch, you’ll have what we call the store value.

So, like very similar to M-Pesa, which is a store value, you will have that as well and you can top up your store value from moving money seamlessly from your bank account into it or even going to an outlet and converting your cash into money in the value of a wallet.

Thank you so much.

Hi Shameel and team. Thanks for the question.

Two questions from me please. The first one is on Telkom roaming traffic volume in Q1, what are the trends there and how should we think of this going forward?

And then just a quick follow up or clear maybe on the Alipay Vodacom software. Can I just confirm that the app will allow optionality for the use of credit and debit cards as well as other payment platforms?

Or is there going to be an exclusive payment channel that needs to be used there? Thanks so much.

So, it will be basically you can have its multiple parts you’ll have a store value, okay, which is where you basically move money into the wallet itself. That's one option.

You can do a linked card, whether it be a credit card or debit card. You can link NEFT, there would be multiple sources of how you can basically contract so you can have pass through directly into your card and so on.

Or you could basically move money seamlessly from your bank account or your card into the VodaPay wallet. So, a customer will have complete flexibility.

Okay, perfect.

On telecom roaming, so, we had a quarter-on-quarter step up from Q4 into Q1, and really what we'd expect is to sort of maintain those levels. So, we saw, in essence, a little bit of the step up in telecom traffic to what we’d seen on our own through the COVID period.

So, there would potentially be some flattering of that, but essentially would expect to maintain those run rates.

Okay, thank you very much.

Thank you.

Thanks, everyone. Thanks for joining us.