What Works: Vodacom's Community Services Phone Shops

This article from the "What Works" series of World Resources Institute focuses on South African cellular phone company Vodacom and its programme Vodacom Community Services, an initiative of business and government working together to achieve social and economic goals. Community Services began under a 1994 government mandate to provide
telecommunications services in under-serviced, disadvantaged communities. According to this 23-page report, Vodacom’s development of
an innovative way to meet this mandate, via entrepreneur-owned and operated telephone shops, has both
provided communication services to millions of South Africans and given thousands of
previously disadvantaged individuals income-generating opportunities and business skills.
The Community Services programme now provides over 23,000 cellular lines at over 4,400 locations
throughout South Africa.


The Community Services business model emphasises the establishment of phone shop franchises, owned and operated
by local entrepreneurs from within disadvantaged communities. At a cost of about R 26,000
(US$3,450), prospective owners can start a franchise to operate five cellular lines in a pre-approved
location. These franchises, commonly called "phone shops" and often operating from converted shipping
containers, offer phone service to the neighbouring community. Vodacom also invests about R 30,000
(US$3,950) per franchise for the modified shipping container to house the phone shop. As a result, Vodacom Community Services provides telecommunications services in townships and other
disadvantaged communities at government-mandated prices that are well below commercial rates.



Phone shops, while not accepting incoming calls, offer outgoing calls at a set rate per minute and are expanding their services, in some cases, to provide fax and data services. Entrepreneurs pre-pay Vodacom for calls on their phones at rates that enable them to retain one-third of calling revenue for themselves. The report states that the volume of calls at most phone shops is such that entrepreneurs can cover their costs and make a profit. The authors state that brand recognition is an important component of the business model. Most South Africans easily recognise the “Vodacom
green” shipping containers that dot the landscape of many communities and ensure that the phone shops are easily identifiable. The phone shops leverage the extensive reach of Vodacom’s cellular infrastructure that currently provides
coverage to 93% of South Africa’s 44 million citizens. The Community Services programme currently partners with 1,800 entrepreneurs who operate over 4,400 phone shops. Vodacom works with the entrepreneurs to provide the
training and direction which is needed to assist operational success, but ultimately relies on the owner's entrepreneurial skills for the success or failure of each shop.

The project creates the multiple benefits of offering communication services to communities, as well as business and management skills to individuals, resulting in jobs and higher income. Vodacom gains an extensive communications network managed by those who have the most potential to understand community needs. The telephone access aids families separated by migration; helps in bill paying, purchasing, and conducting business; and supports the mobility and connectivity of various industries, such as, the transportation and delivery industry. Social services become more accessible through telephone availability. Community and personal safety are enhanced through the ability to report emergencies and service outages.

The key lessons cited in this report are:

• A communications provider using this model can build a distribution channel for its services.
• It can generate traffic that leverages the extensive
  cellular infrastructure it has already built.
• The availability of service can lead to an increase in the number of people
  who own cell phones in disadvantaged communities.
• The use of phone shops gives brand recognition so that people feel most comfortable purchasing their first cellular service plan through the known name.
• For the communications provider along with the economic sector in general, indirect gains are made by building a stronger, more connected, and economically vibrant society.