Neotel reported a total comprehensive loss of R1,8bn in the financial year to end March 2011, the latest annual report from parent Tata Communications has revealed. In 2010, the company turned in a loss of R1,15bn.

However, the company’s directors have expressed confidence in its ability to continue as a going concern. “They are satisfied that the group has access to adequate resources to continue in operational existence for the foreseeable future,” the report says.

The directors base this conclusion on Neotel’s shareholder profiles, specifically the backing of India’s Tata Communications and Tata Africa Holdings, which together own 68,5% of Neotel.

Neotel was licensed as the first fixed-line competitor to Telkom about five years ago after a difficult birth.

The company ended the year with cash and cash equivalents of R74,4m, up from R64,7m at the beginning of the year.

Shareholders have pledged support to fulfilling their obligations in respect of the injection of committed equity of R500m and the signing of a “third equity subscription agreement” in September.

According to the Tata Communications annual report, Neotel had undrawn funding of R597,3m from shareholders and undrawn funding facilities of R133m from lenders.

Management has taken “extensive steps to restructure the business” and based on this is confident of achieving a revised business case agreed to with lenders, the report says.

In addition, Neotel directors have expressed confidence in the company’s ability to manage cash flows on capital-intensive infrastructure projects and to manage cash flows associated with performance against its business plan.

The shareholders’ agreement also allows Neotel to “initiate a rights issue for the procurement of additional equity in the event that additional funding in the form of new equity is required in terms of the covenants under the long-term financing agreement”.

In the 2011 financial year, Neotel grew its revenues from R1,83bn to R2,3bn. Enterprise and wholesale services contributed most of this at R1,74bn (2010: R1,31bn), with network and project services making up R372,8m (R280,2m) and consumer services R188,4m (R169,3m). — Duncan McLeod, TechCentral