TelePassport, a specialist company in the relatively new and highly profitable managed telecommunications industry, is going public with a listing on the JSE's Alternative Exchange (AltX) on 8 August 2007.
TelePassport is the country's longest established provider of least-cost routing services. Least-cost routing is an industry that was born out of directing corporate telephone calls off more expensive networks onto to cheaper networks.
With the emergence of the cellular network providers and other alternative telecommunications providers, least-cost routing has become increasingly complex, with the result that the services of a trusted intermediary are highly sought-after by South African corporates.
In the last three years, TelePassport has evolved from a leading least-cost routing service provider to the country's pioneer managed telecoms provider, and aims to dominate this space.
TelePassport will go to market through a front door listing into its newly formed holding company the Huge Group, instead of the previously announced reverse listing into Cenmag, an investment company involved in the manufacture of electro-magnets and the sale of electrical equipment.
Asked why the change in strategy, Anton Potgieter, Chief Executive Officer, says: "The reverse listing process was proving to be both time-consuming and problematic. Fortunately, we had initiated the front-door process in parallel with the reverse-listing process as the strategy given the current telecoms boom was always speed to market, rather than ease of introduction."
James Herbst, the group's Financial Director driving the listing process, adds: "The change was made seamlessly and without any timing detriment, and our listing timetable remains unchanged."
It has taken a mere three years for the AltX to prosper; now holding 50 companies with a total market capitalisation of over R7 billion. Consequently, investors have ample choice and are now looking for niche operators within growth industries.
According to the company's prospectus, which will be available to the public before month-end, the company's revenue growth has been consistent over the years with a compound annual growth rate since 2002 of 23%. Organic EBITDA for the period 2002 to 2007 generated a CAGR of 30%.
However, it is likely to be the net profit figure that will capture investors' interest. Forecast net profit (at R16.3 million) is 66% higher by 2008 and 37% to R22.4 million by 2009. It is also extremely comforting for investors to know that management team, operations structure and business model will remain unchanged.
Fifty million ordinary shares have been pre-placed at 250 cents a share. The proceeds of this private placing will be used to defray the expenses of the private placing and the listing and the excess will be utilised to fund the expansion of Huge Group.
Says Herbst: "The growth of the company to date is attributed to its technical depth, strong management systems (the company has ISO9001:2000 certification), and its ability to pioneer new market opportunities using innovative and creative methods."
According to Potgieter, the decision to list will place the company in a position to take advantage of current industry consolidation and become an acquisitive operation. TelePassport already has a national presence, with a strong direct sales force and an established channel of dealers.
"Our aim is to become a leader in the R6 billion least-cost routing market," says Herbst, adding, "it will be easier to compete after listing, as we can then easily fund acquisitions in the voice and data markets to augment growth."
The road to listing has been, by industry standards, a phenomenally fast and successful one.
TelePassport has grown from ambitious beginnings as the first local provider of international call-back to South Africa in 1993, to its current status as a top provider of complete value-added, managed telecommunications solutions.
During 2002, the company became the first South African LCR telecommunications company to be accepted by Proudly South African and, in 2003, began the move from LCR specialist to integrated telecommunications service provider through telephone management and SMS services.
Expansion into Namibia took place in 2005 and, a mere two years later, its associate company TelePassport Namibia is in a dominant leadership position within that country's growing LCR market.
Last year, TelePassport concluded a multimillion-rand management buy-in based BEE deal where 30% of TelePassport was transferred to Mojaho Trading (Pty) Limited, a broad-based BEE consortium.
TelePassport's sector competitors include listed Altech Autopage, Nashua Reunert, Telemasters and Vox Telecom, and unlisted Centracell. Against an increasing number of "alternative telecommunications companies" coming to the market, TelePassport's unique managed services approach should enable it to strongly increase its current subscriber base of over 5 000 customers.
Management believes that, in the next three years, their subscriber base will rise significantly as demand for managed telecommunications solutions increases exponentially.
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