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Seacom narrows loss

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 20 Mar 2013

Listed holding company Remgro says undersea cable Seacom narrowed its loss in the first six months of the year to December, with a headline loss of R30 million, compared with R57 million a year ago.

Seacom launched the first undersea fibre-optic cable, to connect Southern and Eastern Africa with Europe and Asia, in July 2009. The cable connects SA, Mozambique, Tanzania, Kenya and Djibouti with the rest of the world via landing points in France (and onwards to London) and India.

Remgro has an effective 25% stake in Seacom, and its share of the loss is R7 million, less than the R19 million reported for the period to December 2011. Remgro notes in its results commentary that Seacom is cash positive and Remgro received dividends of R59 million during the period.

Demand drivers

Seacom provides high-capacity international fibre-optic bandwidth to customers in the form of indefeasible right of use, leases and maintenance charges, where most of the revenue is accounted for over 20 years. Delays with the implementation of the cable through Egypt led to additional unforeseen operational costs, says Remgro.

The listed company says the arrival of the West African Cable System and upgrades to the Eastern Africa Submarine Cable System led to increased supply, which is driving price declines.

"Fortunately, with affordability improving, demand elasticity is playing its part, positively ensuring that demand grows above expectations," says Remgro. It adds that ongoing reductions in terrestrial costs (mobile operator deals with other operators such as Dark Fibre Africa and FibreCo) and increased need for reliable protected routes around Africa are also leading to increased demand.

Remgro also has a stake in Dark Fibre Africa, through a 43.8% stake in Community Investment Ventures Holdings (CIV). CIV has decided to focus on the telecommunications infrastructure market and is selling companies that do not fit into this portfolio.

CIV's key operating company is Dark Fibre Africa, which constructs and owns fibre-optic networks. CIV contributed R34 million to Remgro's headline earnings during the first half of the year.

Remgro made a total net profit of R1.9 billion, compared with R4 billion a year ago, from revenue of R7.9 billion, which was higher than the previous six months' R6.9 billion.

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