Neotel: Is it the end of the road for Neotel?

ADSL South Africa (Broadband South Africa), 31 October 2011

Neotel has suffered a loss of R1.8bn in the 2011 financial year which ended in March this year, an almost 57% increase when compared to the loss of R1.15bn that was suffered in the 2010 financial year.

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Given the above, one cannot help to ask if it’s the end of the road for Neotel? Neotel’s Board of Directors seems to be confident about Neotel’s prospects as a going concern, despite the astronomical loss suffered. They base this confidence on strong backing from Neotel’s biggest shareholders, the parent company, Tata Communications, and Tata Africa Holdings, that collectively owns 68,5% of Neotel. In addition, it is no secret that Ajay Pandey, the former Neotel CEO, has left Neotel at the end of March this year, handing over the reins to Vinod Kumar, the relatively newly appointed CEO and MD of Neotel. Word is out that Kumar doesn’t take nonsense and stick to targets like horse shit to a blanket. This might bode well for Neotel, especially considering the mistake Pandey made last year to refer to us Average Joes (consumers) as “very small play”, which infuriated many consumers, those who form part of the residential telecoms market. Furthermore, Neotel has recently won a contract to run the primary network operating centre (NOC) of WACS or the West Africa Cable System, which is expected to be ready for commercial service some time in 2012.

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In addition to the above, Neotel has managed to grow its revenue with almost 26% from R1.83bn to R2.3bn. Revenue from enterprise and wholesale services has grown from R1.32bn to R1.74bn (up 32%), revenue from network and project service has grown from R280.2m to R372.8m (up 33%) and revenue from consumer services (the Average Joes) has grown from R169.3m to R188.4m (up 11%).

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