Vox Telecom has announced an 87% increase in revenues, to R1,847-billion, in its audited results for the year ending 31 August 2008. Operating profit for the period was up by 64%, to R137-million. Earnings per share, however, were down 54,4% due to a once-off loss of R60.8m following the collapse of Dealstream.
"We've seen strong organic growth across all our core business units and made additional strategic acquisitions," says chairman Tony Van Marken. "The group now services over 18 000 business customers and over 166 000 consumers."
Van Marken adds that Vox Telecom is now the largest black-owned telecommunications company in South Africa, with a total BEE shareholding of 47,17%. During the year the Public Investment Corporation (PIC), which is BEE neutral, also acquired an 8,12% shareholding.
CEO Douglas Reed says the group expects further strong growth through 2009. "We provide an essential business service, and despite — or perhaps because of — the trying economic times we're seeing increased demand for broadband services. We've made substantial investments this year and are well positioned to take advantage of further liberalisation in the telecoms market."
The recent high court judgment that allows VANS to build their own networks will enable Vox to compete on the same basis as the incumbent operators Telkom, MTN and Vodacom. The company also recently signed a strategic agreement with Neotel to supply the second network operator's products to its corporate customers.
Frost & Sullivan comments that, while the fallout from the collapse of Dealstream has taken some of the shine off Vox Telecom's results, the independent telecommunications operator appears undeterred.
"The purchases of @lantic, Datapro, Orion telecoms and Storm have all contributed to a successful combination of targeted expertise," says Frost & Sullivan ICT industry analyst Lindsey Mc Donald. "The company now has a focus on both business and consumer clients within the ISP space and continues to provide industry leading voice services."
Frost & Sullivan believes that as South Africa has such a low fixed line density, there is great potential for the company to grow in the voice segment of the market.
While Vox believes it could compete as a telecommunications operator, Mc Donald cautions that it is only likely to build its own infrastructure "if it does not receive the levels of service it requires from current providers".
"A recent announcement by Vox stated that the company has chosen Neotel as a preferred supplier of backhaul services," she says. "This is an indication of the changing dynamics of the South African telecommunications sector and the impact of competition in the market."
Mc Donald adds that while there is potential for growth in the telecommunications industry, equipment prices still remain prohibitive for the average consumer. The current financial crisis has also put pressure on businesses and purchase decisions will take longer. These challenges are likely to impact Vox's revenues to some extent.
"Other challenges in the market include the continued uncertainty surrounding the regulatory situation in South Africa," she adds. "The Department of Communications has still not made its position clear on the licensing framework. Industry players fear that the Department could revise licensing obligations in view of the Court's unfavourable ruling towards it. This means that operators are unable to move forward with business plans and this is severely hampering the growth of an industry that shows such potential."
Nevertheless, Frost & Sullivan believes that the small business segment is a very promising area for Vox. As the company seeks to build relationships with its clients and position itself as the "alternative telecommunications provider", it is building a perception that it can offer better services than the current providers.
"The potential for resellers and a more developed channel is also on the horizon," Mc Donald says. "We believe that Vox will combine this with its current Voxtrepeneur venture to build a greater sales force."