Far from giving up on the retail consumer market, Neotel wants to expand its customer base by 50% in its current financial year and will spend money on new wireless base stations to deepen and extend its coverage.
New CEO Sunil Joshi, who has replaced founding CEO Ajay Pandey, says he wants to grow the consumer subscriber base by 50% in the 2012 financial year, which ends in March next year. The target is to grow revenues from enterprise (business) customers by 30% this year.
On its expanded retail consumer focus, Joshi says Neotel wants to get “deeper penetration in the areas we are invested in, for voice and data services”. Neotel operates CDMA (code division multiple access) and WiMax networks.
It has 50 000 retail customers, a tiny fraction next to bigger rivals Vodacom, MTN, Cell C and Telkom. Despite its small size, Joshi says Neotel remains committed to this market.
Neotel’s management team has blown both hot and cold about the consumer market, but Joshi signals a renewed focus on this segment. “We will be rolling out new products in the near future, both in terms of capacity, throughput and end-user devices.”
The operator has budgeted about R500m for capital expenditure in the 2012 financial year, some of which will be directed to its consumer offerings. Spending at those levels will continue for the next three years. Money will continue to be directed at its CDMA and WiMax networks, though Vinod Kumar, CEO of Neotel parent Tata Communications, says the company will “continue to evaluate other, later technologies and assess their appropriateness against market demand”.
Neotel is SA’s only telecommunications operator with access to the so-called “digital dividend” spectrum in the 800MHz band. Kumar says Neotel has created a team to investigate what it might be able to do with this spectrum. At the moment, Neotel runs its CDMA network using it. CDMA is better suited to voice services than providing the high-speed broadband that is propelling growth in the industry. “We have asked the team to study that, to see how we can leverage what is clearly a valuable capability.”
Kumar says that in spite of questions about Neotel’s sustainability, Tata Communications has no doubt about its ability to “execute on the market opportunity in SA”. “The Tata Communications board believes completely in this market. The more time we spend here, the more convinced we are that there is a significant market opportunity.”
Meanwhile, Joshi says a restructuring and retrenchments programme at Neotel is now completed. The programme affected about 100 of Neotel’s 1 000-strong workforce. “We are in the process of recruiting an equivalent number of people to bring into our business the skills we need.”
Declaring that Neotel is now “entering its next chapter of growth”, Joshi says the company under his leadership will focus on growing its market share, though he says it will not do this at the expense of profits.
He expects Neotel will become Ebitda positive — Ebitda is earnings before interest, tax, depreciation and amortisaion — this financial year. He declines to say when he expects it to turn a net profit. Revenues in the 2011 financial year were over R2bn in a market Joshi estimates generated total sales of between R41bn and R44bn. — Duncan McLeod, TechCentral
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