Neotel on Wednesday said it was continuing its exclusive talks with potential buyer, Vodacom, as the converged communications network operator crossed the line into profitability for the first time.

The India-based Tata Communications subsidiary had recorded a profit before tax (PBT) early during the first half of the 2014 financial year – a milestone the company only expected to achieve during the final six months of the year.

The company’s PBT remained in the black – albeit “just over the line” – for most of the interim period to September 30, with only the month of July recording a contraction, CFO Steve Whiley said at Neotel’s half-year results presentation, in Midrand, on Wednesday.

“The plan was to turn earnings before interest, tax, depreciation and amortisation (Ebitda) positive in the 2012 financial year – Neotel did this. Then we set a target of being earnings before interest and tax positive in 2013 – Neotel did this too. Now we have achieved our target of being PBT positive – ahead of plan,” MD and CEO Sunil Joshi added.

This comes as the half-year to September 30 delivered a 21% rise in revenue, as Neotel’s sales recorded 12 to 15 times the growth of the fixed-line industry’s 1.4%.

The group, which claimed to hold about 7.8% to 8% of the fixed-line R43-billion industry’s market share – a number Neotel aimed to grow to 15% within a couple of years – also recorded a 105% year-on-year hike in Ebitda.

“Neotel grew revenue across all its business units, including managed services (125%), network services (10%), neovoice (24%) and neointernet and neobroadband (20%). This resulted in sustained customer services growth of 27% in the small enterprise/retail segment, reaching 175 000 subscribers, and 24% in the business segment to just under 3 000 subscribers,” Joshi noted.

Meanwhile, the exclusive talks for Vodacom to acquire 100% of Neotel continued – a process Joshi hoped would be concluded within the next six months.

Due diligence was currently under way, after which the parties would seek the requisite regulatory and competition approvals.

“A combined entity would be better placed to offer an expanded product range and level of increased funding and, as a consequence, enhanced customer choice as well, while enabling Neotel to extend its footprint in South Africa,” Joshi said.

Neotel had “done well” up until now, but it was underfunded and Vodacom would inject the required funds to grow the business further, Vodacom Group CEO Shameel Joosub said at the My Broadband conference earlier this month.

South Africa’s largest mobile operator had the capacity to inject significant capital into Neotel, in part, to leverage the converged operators’ expansive fibre network.

Neotel has access to over 15 000 km of fibre-optic cable, including 8 000 km of fibre in Johannesburg, Cape Town and Durban.