SA's second national operator, Neotel, has turned positive on an operations level, ahead of its initial schedule.
The company yesterday said it achieved positive earnings before interest, tax, depreciation and amortisation for the second quarter to September. However, an analyst points out that this may not necessarily translate to profitability on the bottom line.
In the year to March, based on Tata Communications' latest annual report, the company's net loss widened to around R1.9 billion. In the previous year, it reported a R1.1 billion loss.
Neotel had targeted profitability at the earnings before interest, depreciation, tax and amortisation line this financial year, which is March 2012.
Growing market share
MD and CEO Sunil Joshi says: “We had four priorities at the start of this financial year: create an engaged and passionate team, improve customer experience, grow revenue and market share, and become profitable.
The company says, during the first half of the year, it grew business customers by 23%, its consumer base expanded 40%, and it increased global connectivity, with access to all five undersea cables connecting SA.
Neotel grew revenue by about 25% in the first half of the year as a result of the growing customer base and market share, it says. In April, it said it aimed to grow its consumer base from 50 000 to 75 000 this year and gain at least 30% more revenue from its enterprise segment.
However, Absa investments analyst Chris Gilmour says there are other expenses that may have to come off the operating line before a pre-tax and net profit is reached. If the company has debt, its interest bill could turn its operating profit negative at the pre-tax line, he explains.
Gilmour says the trend is positive, but Neotel will have to sustain it.
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