Neotel, SA's second national fixed-line operator, has reported positive operating income for the year to March, hitting one of the milestones on way to profitability, for the first time since launch six years ago.
The operator this afternoon said it had turned positive on an earnings before interest and tax basis and was now aiming to be positive on a pre-tax basis by year-end. Neotel recorded revenue growth of 12% for the year to March, while earnings before interest, tax, depreciation and amortisation (EBITDA) increased 531% over the same period.
Neotel CEO Sunil Joshi says the company, which has been EBITDA positive for the past seven quarters, now aims to focus on becoming profitable before tax (PBT). "We set ourselves a target of turning EBIT positive, and we thumped that target - now we want to go PBT positive - an aim we anticipate to achieve by the end of the year," says CFO Steven Whiley.
Joshi notes, amid what he says is a competitive environment fraught with uncertainty, Neotel has managed to surpass the industry growth rate. "Neotel continues to capture market share. While the fixed-line telecommunications market in SA is projected to grow at 1.4% per annum until 2018, Neotel is growing at more than eight times this rate."
Neotel's core customer base - the enterprise sector - is up 29% year-on-year, reports the company. This, says Whiley is driven by underlying revenue growth of 44% in managed services, and 24% in network services.
The company's Internet connectivity services from its two flagship products - NeoInternet
and NeoBroadband - have seen more than 75% revenue growth, while voice services revenue grew 24%. Neotel reported a 52% increase in what it classifies as its consumer customers, comprised of small enterprise and retail. "We now have 3 000 business customers, and 152 000 consumer customers," says Joshi.
Network build
He says, over the past year, Neotel has injected over R500m in capital expenditure, primarily to bolster its national network. 80% of the spend was allocated the company's network and network infrastructure, while 20% went to IT, "largely to drive automation and integration of applications".
Neotel reports that it now has access to over 15 000 km of national long distance fibre, and 8 000 km of fibre in major metros - all owned and operated by the company. "This domestic fibre network is connected to all five undersea cables that land on South African shores, linking the major hubs within the country to each other as well as to global markets, both emerging and developed."
Also during its 2013 financial year, says Joshi, Neotel completed phase 1 and 2 of its national long-distance (NLD) fibre routes. Neotel's phase 1 and 2 NLD links extend from Johannesburg to Durban. The company aims to complete phase 3 and 4 (extending to Cape Town) by the end of this year.
Meanwhile, Neotel's long-term evolution (LTE) trials, which have been running since October last year, have come to an end and the company plans to launch commercial LTE services within the next three months - after garnering customer feedback.
The next-generation technology will initially cover only Gauteng, via 50 LTE-enabled base stations, using the 1 800 MHz band. Joshi says, however, Neotel's overall LTE plan is "extensive" and that the company would continue to drive the technology through services and devices in coming months.
"We are currently implementing [LTE] infrastructure in phase 0 and it should be up and running around the middle of Neotel's second quarter. We will share more details at the time of launch."
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