Strong revenue growth at Neotel - TechCentral

Strong revenue growth at Neotel

Sunil Joshi

Sunil Joshi

Seven-year-old Neotel, which is currently the subject of a takeover bid by Vodacom, is showing strong customer growth in the business, small enterprise and retail market segments.

Its revenue for the financial year ended 31 March 2014 was R3,9bn, up by 23% from a year ago, with the business and the small enterprise and retail market segments showing a customer growth of 28% and 33% respectively.

Product and revenue growth in voice was 17%, and 20% in Internet and broadband. The company enjoyed 32% growth in its data centre business.

Neotel CEO Sunil Joshi says that the company now has 200 000 subscribers in the small enterprise and retail consumer space and has about 3 000 customers that are classified as larger enterprises.

Joshi says that Neotel has invested R500m in its network in the past year. It also launched a number of new services. “Many of our services are shifting from a fixed price for fixed bandwidth to variable bandwidth for a variable price to allow customers to expand or contract as they need.”

Neotel chief financial officer Steven Whiley says Neotel’s 2014 revenue growth of 23% compares well with the prior year, when it grew by 12%.

“This is quite a significant growth if you look at what our competitors in the market are doing.”

Neotel’s earnings before interest, tax, depreciation and amortisation grew to just over R1bn. This has had a significant impact on cash generation and the company’s ability to fund capex, according to Whiley.

Despite the solid performance, Joshi says Neotel still requires the Vodacom transaction to proceed for scale and investment. “The combined entity will increase competition in the industry and it will more effectively compete against the incumbent [Telkom], among others.”

Vodacom has offered Neotel shareholders — the company is controlled by India’s Tata Communications — an amount of R7bn to take 100% of the business. The deal is subject to approval by both communications regulator Icasa and the Competition Commission.  — © 2014 NewsCentral Media

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