Vodacom Group Limited (VOD) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Vodacom Group Competition Commission Conference Call. [Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Shaun van Biljon, Managing Executive of Investor Relations. Please go ahead.

Afternoon, everybody, and welcome to the call, and thank you for joining us. I'm joined in the call by Shameel Joosub, our group CEO; and Phil Streichert, our group CFO. The purpose of this call is to provide further detail regarding the joint press conference for the Competition Commission held earlier today. Shameel will start us off with a quick update on what has transpired since the Competition Commission published their final data service market inquiry report in early December last year. He will also provide insights into our engagements with the commissioner as well as the outcome of these engagements. Phil will then talk through the financial implications before we open up the call for any questions that you might have for the panel. I'll now hand over to Shameel.

Thank you, Shaun. Following the release of the Competition Commission market inquiry report and data in December last year, Vodacom decided to constructively engage with the Commission on the issues arise in comment. The agreement provides us with an opportunity to enter into a social contract with the regulators, our customers and the people of South Africa to bring down the cost to communicate and promote digital inclusion. Before I get into the details of this announcement with the competition and with the Commission, it's important to take a couple of steps back to December last year. Following a 2-year investigation by the Commission, it issued a report that was not only scaling in terms of the tone that it used, but it also suggested wide-range remedies from a data pricing perspective and could widely threaten the sustainability of the industry. One of the key elements contained in this report was the call to lower the cost to communicate, particularly for poorer customers. Given the tough economic conditions currently in most of our operations and the need for greater access to communication services, we are engaging with our customers across our footprint for social contracts to see where we, as a corporate, can make an even greater difference. Many of you will be aware that we have made similar comments to those of the Competition Commission over the past couple of years. We have spoken about and have been delivering on our price transformation strategy for over 2 years as part of our commitment to reducing pricing and driving digital inclusion. We made many -- we made these comments in the context of respectfully requesting greater policy certainty, while at the same time, constantly explaining the relationship between gaining access to high-demand spectrum and the pace at which data prices could have fallen. Naturally, both spectrum and policy certainty are reported in investment considerations and ultimately have significant impacts on our ability to address the cost to communicate. Over the past few years, we have made significant progress in our pricing transformation journey, resulting in reductions in data costs for our customers. These initiatives included substantially reducing out-of-bundle tariffs, the introduction of lower-priced hourly, daily and weekly bundles, the laws of URL-specific bundles and, more recently, price adjustments to 30-day bundles. Over the past few months, we took the Competition Commission through our new social contract, was regulated our customers and the people of South Africa. That is our future plans from a pricing perspective as well as our new free central data service platform, which will make access to the data services more attainable. We have robust discussions with the Commission and evolve towards the plan that we have. Our plan also carries the approval of the Competition Commission. And based on this, they have agreed that this also addresses the concerns raised in their report, and no further action will be taken on their part in terms of the agreement and final confirmation by the Tribunal, after which we will introduce the following changes in the next couple of months or the pricing from 1st of April. We will accelerate our data pricing transformation on our 30-day bundles with various price adjustments -- with various price points adjustments in the 30-day bundles starting on the first of April 2020. There will be a further cut on the 1st of April 2021. An example of this reduction will be a 34% decrease in the 1-gig price point from ZAR 149 to ZAR 99. We'll also be making some adjustments to the sub-500 meg bundles to reduce the effective price, go closer to the 500-meg bundle price point. With regards to access to free data services, we'll be launching ConnectU in the coming couple of weeks. Under the ConnectU banner, this is the ConnectU portal which will bring all our free and essential services together. Under the ConnectU banner, we will be doing a number of things for social upliftment. We'll be consolidating all existing essential data services and some new ones into a single platform called ConnectU. The social platform will provide customers with the following: free access to job portals, enabling customers to search and apply for jobs. That will be 7 free sites that we've specifically chosen and will give people the ability to upload their CVs as well. Free educational content through Vodacom e-school or free access for learners to CAPS curriculum for Grades R through 12. And this would give them access basically to the syllabuses. So if you don't have a textbook, you can still access the syllabuses via Vodacom e-school. Free health and wellness information, for example, Mum & Baby, which provides advice in pregnancy, neonatal and childcare through SMS, educational articles, tutorials, video and other tools hosted in the platform. This will now be extended -- the current one deals with pregnant and early childhood. This will be extended to more elements of childhood development. Access to free Facebook Flex, the low data alternative to Facebook, enabling customers to stay socially connected. As well as a full zero-rated Internet search function powered by Wikipedia. This will allow customers access to the entire Wikipedia data of knowledge free of charge. This will deal with basic access or access to the basic Internet. We are also extending free access to schools, universities and T-Vet college portals, which will ensure that learners and students enrolled into these institutions will be able to access relevant school or university-specific information for free. This ultimately enables to make a user of the future. We will also be extending 2 free SMSs to customers daily provided that they have been active in the past month, and they can be accessed on a new portal. Finally, there are some government sites that will now also be free for citizens to access as well assist everyone in gaining access to much needed government services, as these are now moving into the digital space as well. We're also extending further discounted bundle offers to low-income suburbs and villages, ensuring that this benefits people that really need it the most. In most instances, this is in areas where we are currently under-indexing from a market share position, so this will potentially benefit us as well. So this is where -- what we'll do is we currently offer what we -- our Just 4 You offer to low-income groups to 800 suburbs and villages. We'll now extend that to 2,000 villages and suburbs. And they will have a bigger discount than the normal published price on the multibundles. Ultimately, we believe that this will lead to a more connected society and ensure that all customers get more comfortable using data services and thereby widening our base. Taking all of these components into consideration, we believe that these efforts will give our customers the opportunity to connect for longer and for less, thereby further contributing to narrowing the unacceptable digital divide that exists in South Africa. Our agreement with the Competition Commission will be valid for 2 years. We will review all these propositions after this period to evaluate its continued sustainability and the potential to expand or reduce the services. The -- we -- the offers will also be premised on the fact that all these free services will also drive additional usage. So we think part of it will be offset by increased usage from customers, but also greater digital inclusion, which will hopefully help to drive up the number of users using data. You will remember that only about 53% or 54% of our customer base today uses data. So this will ensure that a bigger portion gets included into the utilization of data. Before we take questions, let me now hand over to Phil to give you some guidance regarding the financial impact that this might have.

Thanks, Shameel. Let me start by saying that price transformation is now part of our DNA. Some of you will remember that we did this previously with voice pricing, when most of you are aware of the progress that we've made over the past 2 years on data pricing. Some of what we have agreed with the commissioner already formed part of our future plans, although no fast tracks from a price reduction perspective, which means, to some degree, we have factored this into our guidance. Naturally, the Competition Commission would not have been privy to this information when they finalized their report as they looked at historic data points around pricing. In our media release and at the joint press conference, we have stated that these latest changes will result in savings to customers of about ZAR 2.7 billion. This does not factor in any increase in usage that is likely to occur given the savings for customers. We believe, as it was the case with our other pricing initiatives, that there still is sufficient elasticity in the market to absorb some of these price reductions over the medium term. And as a reminder, we expect a similar profile to what we experienced during this year, i.e., the biggest impact from repricing was evident in the first quarter, which started to improve into Q2, as elasticity came in, and finally, with good growth in the third quarter, which we have seen in the third quarter we just reported on. We believe that we should be able to see similar elasticity in this current price change. Albeit that we had negative economic growth recently, the outlook for the year remains relatively in line with the previous year's forecast. And we also have almost 2 million more smartphone customers than we had last year, just under 3 million more data users, while 4G customers, which normally has got better elasticity, also increased by almost 3 million customers year-over-year. So our ability to deal with accelerated price transformation has actually improved from 1 year ago. Based on this, our internal modeling, therefore, indicates that the accelerated pricing transformation from this initiative will impact service revenue growth with a drag of just under 1.5 percentage points for the group on an annualized basis, all things being equal. Our 3-year guidance, therefore, remains in place, albeit that next year might be at the lower end of the guidance. As a management team, we are also working on plans that will assist in offsetting some of these effects and hope to be in a position to announce some of these fairly soon. We'll pause now on that note and open up the call for questions.

[Operator Instructions] Our first question is from to Cesar Tiron of BofA Securities.

I have 3 of them, apologies. The first one, can you please explain what did you model in terms of revenue that you could recover from elasticity? Is it about 50%? The second question, can you please explain what cuts did you -- price cuts did you agree with the Competition Commission from 2021 onwards? And then third question, obviously, after these cuts, the gap between prepaid and postpaid prices will shrink. Is there a risk that we're going to see some cuts to postpaid pricing as well?

Okay. I'll just quickly answer your first question. I think you're directionally right. It's about 60% elasticity that we have assumed.

Okay. Then to your second question. Basically, the big cut is this year. There's a further cut next year, and then it stops. So effectively 1 April 2020 and another cut in April 2021. The cut in April 2021 is much smaller, so bringing the cumulative effect to roundabout 25% or 50% over both years. So if you take the 34%, you can assume another 10% or 15% decrease in year 2. Yes. So I'm just using the 1 gig as an example. The important thing is these bundles are across both contract and prepaid, okay? So they both -- they relate to everything, not just contracts. So there is no impact because they're basically cut across both. This is -- so if you're on a contract, you have the added set of data or the added set of money that you can spend on data that's included in the package. Once you run out of that, you obviously buy bundles. Or if you have one of our flagship products, which is you buy ZAR 100 of airtime or ZAR 200 of airtime, you then still have to buy a bundle. So this affects both prepaid and postpaid.

The next question is from JP Davids of JPMorgan.

Two questions from my side. Firstly, I just wonder if you could run through the commitments you've made around Just 4 You, so the below the line pricing, and specifically, what sort of commitments around transparency there. And then secondly, just around your assumptions for FY '21. I'm assuming that you're not factoring any sort of major competitive disruption or any disruption to the handset supply chain?

Okay. So the commitment for J4U is more transparency issues. So basically, when we advertise in J4U, what you'll be doing is not advertising the product and essentially saying this is x percent of the normal market price. So it's just bringing a bit more clarity around this is the normal market price. This is the special price that exists on J4U. Remember, that is using machine learning and is personalized to the segment of one, so you can confidently assume that it's not dilutive yet. So that's the one. In terms of assumptions?

Yes, let me quickly deal with that. So our FY '21 assumption is, simplistically speaking, all things being equal, so comparable situation as we've seen it last year. I think last year was a good evidence, a point of proof point of the elasticity that we actually saw throughout the quarters. So that's the one thing. Look, if your question is more specifically around handset supply and COVID-19 or the coronavirus impact, to be honest, I mean you're seeing what's happening at the moment in terms of turbulences all around in the last 10 days. We are doing well so far. So far, so good. But we have not taken a view on any of these effects now when we speak about the effect of Competition Commission. So this is why I said in my disclaimer all things being equal, but as I also said, so far, so good. I think we are -- from a supply point of view, are not facing any issues.

And just 1 quick follow-up on J4U. I mean that was a potential area of pushback by the Comp Com. How did you get them comfortable that that product is sort of share and transparent and good for the consumer, I mean outside of flagging what the discount to the advertised prices, on the headline price?

We're skilled. No, joking. I -- no. I think what we did was we actually took them through the benefits of the product. And I think there's many things that happened through this process that I think is important. One is that the Competition Commission has a better appreciation now of the challenges that we face in terms of costs, one. Two is they have a better appreciation of the -- let's say, the worth of the Just 4 you bundles as well as the worth of the hourly, daily, weekly bundles. Going into the process, the Competition Commission thought that the shorter bundles weren't really effective, and that's what they had in the report. And they didn't really like Just 4 You. They've come out, and you would have noticed today that they were very much stressing the 2,000 towns in the Competition Committee and the J4U special offers and so on. So I think what we've done well is really by working through it, it really shows them the benefits that come from these products. And yes, so I think there's a better appreciation all around of what's actually involved in running a telco.

And, JP, I think it's important to note that the agreement also puts aside everything else that came out of the report from the Competition Commission. So that basically beds down everything that came out of it. So we don't expect further action from that perspective as they now also understand it better.

Yes. Well, I think that's like a very important point because it's everything. It's all the wholesale, all retail, everything. This is the full and final settlement, if we can call it that.

The next question is from John Kim of UBS.

Just a couple of points for clarification. Regarding the price transformation, I just want to confirm that this is still confined to prepaid data in South Africa for bundles that are 500 megabits and below, i.e., you're unifying pricing. There is a price cut that's front-end loaded this year to the tune of 30%. Next year, it looks like 10% to 15%. There was a mention of service revenue or savings of ZAR 2.7 billion. Is that an annual number? And does that translate to the revenue? Because what I'm trying to do is to square that figure with the 1.5% drag to service revenue growth that I think Phil spoke about earlier.

Let me take the second question first. So the ZAR 2.7 billion is basically the straight savings of giving back to consumers.

Consumers.

Yes. So that's a straight saving to consumers. The actual financial effect that refers back to the 1.5 percentage points is including the elasticity that we have assumed, which has been informed by what we have seen over our pricing transformation, the last 2 to 3 years, including the step that was taken a year ago on the adoption of the end user subscriber charter. And that the net is what I quantified at group level, 1.5 percentage points of drag to service revenue growth.

Okay. Helpful. Switching gears slightly -- sorry. Go ahead.

Yes. So to be clear, John, the pricing is across all monthly data price points. So not just the below 500-meg, it's everything. The discounts vary depending on where you are, but it's on the smallest one to the biggest one in multipricing, okay? One of the things also is that -- and one of the things that the Comp Com was hoping for to this process and also could be a benefit to us is that if customers adopt more monthly bundles, the Comp Com's motivation was that effectively we'll stay active for longer. And obviously, that is a dual effect for us because if that's the case, then it also is positive because if we can get 2 or 3 active days extra out of the customers through this process, that, in itself, over and above the elasticity helps to compensate in a big way for the price stops.

Okay. Helpful. On the other initiatives including zero-rate data and free access, is there an OpEx or CapEx number or quantification to these efforts?

No. So the CapEx stays within guidance. There's no changes to it. Effectively, what we're doing is, remember, as Phil said, as the 60 -- this year, we've experienced 65% elasticity. So 60%, 65% elasticity is what we would have basically assumed into this as well. And I think the free services are -- actually, they could be quite beneficial from the perspective that if they drive up more people engaging in data and if we can get the data users up. Phil spoke about the 2 million to 3 million extra customers that have grown just this past year. If we can achieve that next year again, these are, again, measures to help to compensate for any of the measures that we've put in. And also the differential between us and the Competition will also hopefully, be a bit of an attraction for customers to come and join us.

The next question is from Jonathan Kennedy-Good of Standard Bank Group Securities.

A simple one for me. You mentioned that there'll be no further action from the Comp Com. Is this a contractually signed agreement with you and them? I'm also struggling to understand whether this settlement is in terms of any law that's governing your license agreement issued by the South African government or was this a case of moral suasion and you more popping to whatever the Comp Com wants out of price reductions for the detriment to our shareholders?

That's quite strong, Jonathan. So this is an agreement. This is a constant agreement, to be more specific, ratifying the legal -- the right legal framework to give effect to this. The content agreement is between Vodacom and the Competition Commission, and it has to be ratified pre 1 April before implementation by The Competition Tribunal, which then makes it binding on all parties to the agreement. So this is in full and final settlement. And actually, I would mention to say that it's beneficial to shareholders because we've just taken off what could have been a potential big fight that went on for years. And that -- an impact in the share price has actually put it into a very positive perspective.

Well, I just don't understand how you can keep giving into government and not get spectrum out of the deal or any kind of guarantees that this isn't going to come back in 2 years' time outside of ambit of wholesale price regulation that the ECA covers?

So I mean I think you need to differentiate between 2 things, the Competition Commission business is not to regulate the outcomes, okay? And this -- to put into perspective, so we don't get carried away, this is the first time in 26 years that the Comp Com's actually done a data inquiry. And essentially, they did this on the back of the minister asking for this and the data must fall and valid and so on. So it's not the Comp Com's business to normally get involved in it, and they've been clear on that. So this is a full and final settlement on this matter for the foreseeable future. Does this mean that they will never look at it again? Probably not. But is it limited to, say, that after 2 years, they will do it? No. This is a full and final settlement of this issue and so on. So that's the one part. Secondly, the point is -- and just to be clear, we've also not gone in and said, "Sorry, Mr. Comp Com. We've been bad, and we're dropping prices." No. In fact, what we did was we went to them and said, "Here's our plan. This is what we would like to do. Are you in support?" And I think we said this upfront to your staff and shareholders that this was our plan, to go in with our plan. We went in with our plan. We shared it. There was robust discussions. A few additional asks, nothing ugly, untoward, but nothing on pricing. The pricing is exactly as we've put it forward. And so this is -- this essentially is our plan. And remember, bringing down the pricing, taking away the news that keeps coming up about the 1-month data, 30-day bundled pricing and dealing with the issue once and for all, I think, is a big, big benefit for us. You will also have noted that ICASA, immediately after the Competition Commission, which they were also present at, issued a statement to say, "We understand that this is a big commitment from the operators or for Vodacom specifically. That means that we need to hasten the allocation of spectrum." And as the president has committed, spectrum will be allocated by the end of this fiscal year -- or, rather, sorry, this -- by the end of this calendar year. Not fiscal year, by the end of this calendar year. And the one will be licensed in 2021. So that's basically the commitment that ICASA has, on its own, come out today and we're very cleared on. So that was also part of the discussions with the government, with the Comp Com, with the minister, in terms of, look, we're going to do this, but you need to also give us the 2. And that's why you'll see in my speech this morning, I stressed the need for the spectrum to also be -- to come quickly.

The next question is from Preshendran Odayar of Nedbank CIB.

I've got -- just got 3 quick ones. Firstly, I just want to clarify that these cuts that you are doing, they're only on the monthly bundles, not on weekly, hourly or ones that are longer than a month? Secondly, I remember the Competition Commission focused heavily on the 500-meg bundles and smaller. Can you give us some color about how big those are in your world? And what are the price cuts on those 500-megabyte bundles? And then the third quick one is the Competition Commission report made mention about transparency around pricing for roaming and accounting separation of your wholesale network. I didn't see anything about that matter today in the press conference. Can you share some color on that of whether the Competition Commission and you guys have made an agreement over that? Or is that being taken out?

Thank you. So firstly, on -- it's monthly-only, okay? So the hourlies, dailies and weeklies remain unchanged. This is a commitment only on the monthly data prices. The 500 meg and below was essentially -- the gap between the biggest bundle, the smallest bundle and the 500-meg bundle was too big. So in this price transformation, then we'll see -- we said that the price cuts are up to 40% on certain price points. We've fixed the gaps between the smaller bundle and the 500-meg bundle. All of that is in the financial impacts that have been taken into account, okay? So what it does is it just -- and I just want to add as well, these are not all just price cuts, okay? We've put the financial effects. Some of it is adding more data. So some of it, the price point has stayed exactly the same, and more data has been added to bring down the effective rate and so on. So it's a combination of price decreases and adding more data. Finally, the roaming in the wholesale and all of that, this has all been removed. And effectively, this commitment that we've made is in full and final settlement of everything. There isn't anything that they can come back with this. The inquiry now is closed as far as Vodacom is concerned.

The next question is from Slava Degtyarev of Goldman Sachs.

First question is, how do you think your competitors will behave on the back of the announced agreements? And secondly, do you think your current network is well prepared to cope with the higher data consumption? Can you elaborate on that? Or how much do you count on the 4G spectrum allocation to cope with the increased demand?

Okay. So firstly, in terms of competitors' response, I think MTN is in -- from what we -- the Competition Commission, from what they've said, is basically engaging with all the operators. I don't see a big response from Cell C. I think Telkom is very competitive, so it doesn't need to do much. Yes, that's the one. MTN, I suspect would -- once we put pricing out there, would be very similar to what we have. Maybe some of the add-ons will be different. Maybe it will address -- addressed in a different way. But I don't see -- I think the commitment is such that -- let's just say Telkom's got its own problems, the way I see it. Cell C has got its own issues, and us and MTN will have to deal with this repricing. So I don't think it generates any new untoward competitive dynamic, if I can put it that way. In terms of spectrum, remember now what we've done is there's a spectrum auction coming, which will allocate spectrum. I think that's one. Two is that we've extended the flexibility to do more in the Rain deal should we so wish. So we've got that availability to do more roaming and our election on different areas where we see the capacity constrained should we need it. And then we've also got the deal that we've concluded with Liquid, which essentially allows us to do roaming on 5G. This -- and I think these are important for what we call spectrum security. So we have spectrum. There's nothing better than holding your own piece of spectrum. And the more spectrum we have access to, the cheaper the cost to manufacture -- or creates a gig of data is. And therefore, that's why it's important to us. But at the same time, we have the flexibility in the roaming agreements, which then provides us with spectrum security going forward.

And just operationally, our engineers have got track record and experience of managing basically traffic growth. You've seen it last year, where traffic was ramping up as well on the back of the -- how the bundle price reduction moved into the space of 50% to 60% in prepaid, even a little above. And we've managed that well and all other factors Shameel has covered from a longer-term perspective.

And remember, the guidance in terms of CapEx doesn't change. So which means largely, we spent last year about ZAR 9.7 billion. That's the range that we're spending in these days. That will basically not change. That's up for South Africa. That -- so what that means is most of the CapEx that we spend anyway goes to capacity. That's what the CapEx is for. It's mainly for capacity and a little bit of coverage.

Next question is from Ziyad Joosub of Nedbank. My apologies. The next question is from Myuran Rajaratnam of MIBFA.

I've got 2 questions, a very simple one. And you did touch on it earlier, but it's on top of my head. On the monthly bundles, is now the pricing curve flat from 1 gig to smaller bundle size? Because that was what the Competition Commission actually presented as a graph, and it's top of mind for them in their market inquiry report.

So the answer is no.

So it's not flat. It's still -- the smaller bundles are more expensive on an effective rate?

Yes, that's correct. So basically, what will happen is just a laddered decrease. So the gap used to be -- could have been up to 40% difference between the 500-meg and the 10-meg bundle. Wide gap is now substantially reduced to be a more narrower gap between the smaller and the bigger. But they -- it's still laddered, and it ladders from 10 megs to 200 gigs.

And the gradient has actually substantially come down. And we expect it as well in the future, but it's not flat, no.

Okay. It's not flat. The second question is, I suppose it's fair that -- it's good that you guys got ahead of the competition, your peers, and did -- and gives you some breathing space for 2 years. But I mean I suppose if he's an analyst at the Competition Commission, one of the things you'll be looking at is, okay, the 30-day bundle pricing curve is flattish. But if I look at it from a poor person's point of view because there was -- there are some comments on that that you guys have been anti-poor and things like that, right? Whether it's fair or not, you believe that aside. But the point is, if you look at your headline rates right now, and if one buys 250-meg bundles, weekly bundles, right, that makes you -- gives you a gig over a month. Or you buy a gig bundle, monthly bundle, it's still quite expensive to buy the 4x 250-meg bundle, right? So you're basically penalizing poor people because they don't have cash flow. Or is that a potential...

Myuran, hear...

Let me finish. Let me finish. Let me finish. You'll get a chance, too. So is there not a possibility that in 2 years' time, the Comp Com will come back and say, "Guys, what about this now? Aren't you like really not being fair here?"

So I think you've got a theory that you're kind of pushing. We're not listening. I'm trying to explain to you that the issue is sorted, that the gap between the smaller bundles and the bigger bundles are now not more than 5% to 10% differential.

No, I'm talking about -- you're not -- I'm talking about weekly bundles that amount to a gig, right? You buy them weekly versus a monthly bundle that's a gig. The headline rate difference, which I've done the calculation for it, and an analyst also did his own and sent it to me as well, unless we both make a mistake here, it seems to be there's a gap there. And surely, the Comp Com analyst sitting at his desk, in 2 years' time, he's going to say, "Shameel, what's up here?"

So I think you need to -- firstly, this settles the Competition Commission thing one completely. There isn't another review after 2 years. There's nothing like that. This is full and final settlement. The price cuts are 2 years, right? So you've got to distinguish between the 2 things. This is not a -- basically, after 2 years, you know what, now I'm going to go back and find other things. That's one. Two is that you've got to distinguish between -- the prices have changed. I think you should wait for the price table to come out, which effectively has not been published yet, will be published and go live on the 1st of April. And effectively, that will show the gaps between the small and big has been decreased. The smaller -- the daily and weekly bundles will always contain more value than the monthly bundles because you're buying on a shorter time period, and there's breakage involved. So effectively, what will happen is if a monthly price is -- an example would be ZAR 99. I'll give you current rates, just to give you an example. ZAR 99 in the app for a gig of data, ZAR 49 a week for a gig of data. So that will stay. That will not change. And that's what we got the Competition Commission to be comfortable with, that in fact that is beneficial to people. And we provided real stats and showed them that 80% of what's being purchased is actually -- is short-form bundles in prepaid. And the customers are loving this benefit that they get. Sure there's breakage, the breakage that pushes up the effective rate, but they get a lower headline rate, and it's done on the perception that they'll buy more. Secondly, we then explained and took them to the detail of our personalization, and J4U plays a role. Again, they found comfort with it once they saw the facts and the details and so on that goes with it. So I think we need to be -- we fixed the laddering. So the laddering in the gap is much smaller now, which is where the concern was. And that -- we've done away with all anti-poor issue by doing 2 things: one, by extending to more towns; and two is by fixing the laddering below 500 megs. So if you take the 500 megs and you work down to the cheapest bundle, it's not more than a 10% variance now. Whereas previously, it could have been as much as 40%.

Okay. Now that's clear. And I think it's a great thing that you guys did, I mean capturing this is really a wonderful thing because you got ahead of the competition, your peers, and did this. And the fact is -- I mean that's been true for everyone concerned, I think. And I think I'll leave it there before your finger starts rising again, Phil.

The next question is from Ziyad Joosub of Nedbank.

Just 1 question, please. The 60% to 65% elasticity that is discussed, could you maybe let me know to what time period that relates to? And did it overlap with the out-of-bundle cuts? And also if possible, if you have this information, the elasticity from the out-of-bundle cuts versus, let's call it, normalized price cuts, is there a difference between the 2?

So basically, what we did was when we cut the prices, what we're giving you, the 60% to 65%, is what we experienced essentially from the drop in February last year to now. So -- and if we look at from 1st of March -- or 1st of March last year to March this year, what we've seen is a 65% increase in traffic, okay, on the back of the out-of-bundle cuts and so on. So that's the elasticity that we talk about that has come through quite nicely to offset the decrease in pricing that happened. We're anticipating a similar kind of impact or some of the kind of results this year. So again, we'll see -- we think we'll see a similar trend to last year, biggest impact in the first quarter, as elasticity comes through and the improvement through the -- if you remember, this past year, we were negative in the first quarter, the underlying growth was 4.2%. Then it went to 4.6%. So you started to see the benefit coming through the year. But you did feel it in the first quarter, and I think that will probably be the case here as well.

Okay. So sequentially, elasticity, you can just confirm did increase as we moved through the quarters? Because the lowest elasticity would have -- okay.

Correct. Yes. And just on top of that, as we said in the call, we feel we are in a better position than we were 1 year ago, simply because we've got more data customers, more 4G customers. So in particular, those customers with the 4G device that has got the ability to show also higher usage, we've got basically substantially more, which puts us, we think, in a position where we are better equipped to deal with this accelerated pricing transformation. But also to put me -- to put it quickly out, the profile that I've described and that Shameel has described throughout the year is probably similar, but I don't expect a negative Q1, to be quite clear. That was last year. You remember, we've unpacked it into different components. One component was the out-of-bundle price reduction. The other component was the transitioning point, which was a transition factor, which was the roaming revenue. And remember, contrary, now we are having the full telecom roaming revenue in our numbers, which actually gets to a lower figure, which you have seen over the past 2 quarters, and, obviously, also for Q1 because the cutover of the entire telecom traffic happened at the end of Q1. So that gives you support in the numbers. This is why I would just like to leave you with the view, it's a similar improvement profile, not the same growth rate, if you know what I mean.

So we have no further questions in the queue. Do you have any closing comments?

Sure. Thanks, Chris. In closing, I'm encouraged by the steps that we are taking as part of our social contract with our customers, regulators and the people of South Africa. Most encouragingly, this does now concludes on a marketing quality -- the marketing quality where that was an overhang to the industry for more than 2 years. By means of this agreement, we will now also avoid another lengthy process, and therefore, this gives immediate certainty to the market. We look forward to concluding the spectrum auction with ICASA in the next coming months, paving the way for even more clarity within the South African regulatory environment. Thank you to everyone for joining us on the call.

Thank you very much, sir. Ladies and gentlemen, that then concludes this conference call. You may now disconnect your lines.