Neotel Makes Inroads in Telecoms Market in South Africa

Mergers, Acquisitions and Financial Results

National operator Neotel has clocked up R1bn of business in its first year of operation and expects to win deals worth R2bn this financial year as more companies grow to trust its services. Profits are still a long way off, however, as capital expenditure of R1.5bn this year will soak up its revenue as it rolls out more wireless and fibre network facilities.

Neotel will invest R11bn in its operations over a decade. It spent the first R1,5bn last year. Its cash flow should turn positive after three years, said CEO Ajay Pandey.

"Out of the top 350 customers, we have made inroads into almost 120 and we are beginning to get repeat orders. We have been able to pick up contracts worth more than R1bn."

So far, most companies have given Neotel only about 5% of their telecoms spending, but a handful now give it at least 25% of their voice and data contracts. Three organisations were planning to phase Telkom out of their businesses entirely though none had done that so far.

Its network was extensive enough to let it reach most corporate premises within 48- 72 hours, he said, either by laying fibre or by using wireless "last mile" connections.

From the end of this month, consumers in certain areas would be able to sign up for a Neotel rather than a Telkom line. It will also offer handsets capable of handling video calls and accessing the internet. Telkom announced this week plans to bulk up its own voice and data carrying capacity, largely by installing far more wireless technologies.

Business Day