Photo by: Duane Daws
As converged communications network operator Neotel continued its “consistent” year-on-year growth, MD and CEO Sunil Joshi said on Monday that Vodacom’s buyout of the Tata Communications subsidiary would give it “greater scale and investment” – and the capability – going further.
Telecommunications giant Vodacom last week concluded an agreement for the 100% buy out of Neotel for R7-billion, with CEO Shameel Joosub stating that the subsidiary and its employees would now be absorbed into Vodacom’s fixed enterprise business to operate as a standalone business.
And while Neotel’s growth and year-end results were “good”, Neotel required the Vodacom transaction, which was expected to be completed by the end of the year, to accelerate scale and investment.
“The transaction with Vodacom is very important for Neotel’s future and when [its] approved, [the absorption into Vodacom] will enable Neotel to offer a broader suite of products and services to its customers by combining fixed-mobile convergence technology solutions and an infrastructure of scale across South Africa,” Joshi said.
The combined entity also was expected to increase competition in the industry and compete more effectively against the incumbent, besides others.
Neotel invested R500-million in capital expenditure last year – with another R500-million set aside for the 2015 financial year – and the cumulative investment since inception in 2007 reached R5.8-billion.
Vodacom’s financial backing would enable the company to extensively scale up network and infrastructure investment in future, Joshi noted.
However, while the regulatory and competition approval processes were under way, it would be “business as usual” as Neotel executed its 2015 financial year strategy.
The group, which ended the year with 9 000 km metropolitan fibre and 16 500 km national fibre, would remain focused on continuing its strong growth trajectory and ensuring a sustainable path to profitability, expanding its network footprint and continuing to develop innovative technologies, while growing its market presence in the large and medium enterprise, government and small enterprise and retail segments.
Neotel CFO Steve Whiley said the year ended March 2014 saw earnings before interest, tax, depreciation and amortisation double to just over R1-billion, while the company’s profit before tax turned positive, ending the year under review at R87-million.
Revenue jumped 23% to R3.9-billion as Neotel’s business customers and small enterprise and retail customers respectively grew by 28% and 33% to 3 000 and 200 000.