Second national operator Neotel wants to be profitable at cash level this financial year, as it plans to become profitable.
Neotel has come under fire from consumers, who have argued that the operator has failed to introduce true competition into the local market. In addition, the company is carrying heavy losses.
According to its latest annual report, it made a R1.1 billion loss, almost 50% higher than the R739 million it lost in 2009. In 2008, it lost R320 million.
However, recently appointed CEO and MD Sunil Joshi, who took over from Ajay Pandey at the beginning of the month, has vowed to turn the company around.
Neotel is targeting profitability at the earnings before interest, depreciation, tax and amortisation line this financial year, says Joshi. That means Neotel will be profitable on a cash basis by next March.
The telco has grown from a zero base, to a company that turns over R2 billion in revenue, in four years. The total fixed-line market in SA is worth around R41 billion a year.
Neotel expects to invest around R500 million in capital expenditure this year, a figure that is likely to remain unchanged over the next few years.
Majority shareholder Tata Communications has also reaffirmed its investment in Neotel. MD and CEO Vinod Kumar says the Indian group will continue to back Neotel and provide funding if necessary.
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Joshi explains the company has grown very fast since its launch, and didn't have time to assess its next phase of growth. However, at the end of last year, it embarked on a restructuring exercise, which saw about 10% of its staff relocated within the company or retrenched.
Now, says Joshi, the company is investing in key skills, such as managed services, and aims to add about 100 staff members to its team. He says the company wants to be ready for its next growth phase, which it is entering this financial year.
Neotel aims to grow its consumer base by half, from 50 000 to 75 000 this year, he says, and gain at least 30% more revenue from its enterprise segment, which serves about 100 companies. “We do have a sound business strategy.”
Neotel has been in operation for about four years and has spent R3.5 billion in establishing infrastructure, says Joshi. It's not uncommon for a telecoms operator, especially a new entrant, to have to invest heavily in infrastructure, according to Joshi.
However, he is confident the business will grow and that it has a strong proposition for the South African market. However, Joshi concedes the company has experienced hurdles, and expects more along the way, which it will tackle.
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