iBurst’s battle
Rumours recently emerged that iBurst is in financial difficulty, with some commentators even suggesting that the company is about to go bust. iBurst CEO Jannie Van Zyl denied these rumours, adding that the company is busy with a restructuring process to increase revenue and cut costs.
“It seems these activities unfortunately triggered some of the comments and rumours around iBurst’s financial status. In the current economic climate all companies are looking at increasing efficiencies and tightening the belt a notch ot two. iBurst is no exception,” said Van Zyl.
Van Zyl took over from Alan Knott-Craig Jnr in July this year, something many believe was a move by Vodacom to save iBurst which was bleeding money at the time. Van Zyl is closely linked with Vodacom having been intimitately involved with its broadband strategy.
Vodacom has invested millions in iBurst/WBS – of which it now owns 24.9% – and further partnered with iBurst to roll out a national WiMax network. This network most likely cost hundreds of millions of Rands, something which means that Vodacom cannot afford to see iBurst/WBS go belly up. It is therefore not inconceivable that Vodacom may have placed a leader in charge of iBurst who they trust to steer the company through challenging times.
Management shuffle and staff cuts
A management restructuring process meant that Van Zyl became the group CEO, with Ian Halliday, CEO of iBurst Africa, moving to the position of iBurst SA’s new Managing Director and Thami Mtshali taking over as the executive chairman of the WBS board. This structure however did not last long, and Halliday has now moved back to iBurst Africa. iBurst CEO Van Zyl explains that both he and Halliday were more operationally focused than the previous structure.
“In August 2009 the Exco presented a plan to the board that would see the company restructure to be better aligned with new business initiatives and the current changes in the industry. At the same time the listing activities of iBurst Africa and it’s expansion into more African countries picked up and Ian opted to move over to Thami’s office to assist with these initiatives,” said Van Zyl.
“Therefore, and in line with these initiatives, the position of MD was made redundant from 1st of September and Ian is now full-time assisting Mtshali. Other restructuring processes also kicked off at that time and are currently nearly completion,” explained Van Zyl. This restructuring includes a staff cut of around 20%, which Van Zyl says is needed to drive down costs in the challenging economic times.
“iBurst decided to not go through a formal retrenchement process, but rather offered a very attractive voluntary retrenchment option to the staff. This allowed the staff to be part of the process ensuring the most positive approach to the restructuring requirements. I’m very confident this was the correct way to proceed and we should be able to conclude the process, which started in August, within the next few days. Then it’s nose to the grindstone stuff in building the new initiatives,” Van Zyl added.
Too much spending?
Questions are however emerging as to why staff cuts are needed in a company which recently launched a new business unit – iBurst Business – and where subscriber numbers continue to grow. The answer may lie with the previous iBurst Managing Director, Knott-Craig Jnr.
One source close to the company, who asked not to be named, said that Knott-Craig Jnr. was not averse to spending money freely and had employed too many new staff members at very high salaries. Expensive marketing campaigns and excessive office space may have contributed to the need for Van Zyl to step in to contain costs.
Knott-Craig Jnr. however denied this, saying that he left iBurst in good financial health. “We beat our budget targets for 3 years in row. The board approved bonuses for all staff in April 2009,” said Knott-Craig. He added that he believes that iBurst has a strong financial future.
On the accusations of overspending while in charge of iBurst, Knott-Craig Jnr. said that while he cannot comment on speculation he was confident that he left the company in good financial health. “If anything, we may have under-spent during my time at iBurst,” Knott-Craig said, adding that he flatly denied speculation that he employed too many staff members at high salaries.
Most valuable asset
iBurst recently surpassed the 120 000 subscriber mark, and Van Zyl said he is planning to double this figure by early 2011. The company is also increasing its focus on the small and medium size business market, partly through its subsidiary Broadlink which provides wireless metronet links to the business market and especially through the launch of iBurst Business. “Although only a few months old, iBurst Business is doing extremely well and has consistently exceeded monthly sales targets,” Van Zyl added.
iBurst will have to make the most of its most valuable asset, namely its extensive self-owned network, to ensure that it overcomes the challenges it faces and ensures profitability in future. The local wireless broadband market is very competitive – with fairly slim margins – which means that iBurst will have to be innovative to compete with companies like Neotel, MTN and Vodacom.
Despite these challenges Van Zyl is confident that the company is well positioned to address the needs of the local broadband and business markets, and that people can expect a few fresh offerings from them soon. Says Van Zyl: “We are living in exciting times and iBurst is extremely well positioned to capatilize on all the activities happening in the market right now. From the deregulation to the current drive to lower mobile termination rates, iBurst is at the right place at the right time.”
iBurst’s future – comments and views
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