Vox Still Looks Good
While Vox Telecom has gone through a period of consolidation after its acquisition spree in the last few years, the company has felt the effects of the economic downturn. However, while its interim results show a large drop in earnings per share, there is still much to recommend it.
The independent telecommunications company reported a 22% increase in revenues and a 20% increase in gross profit over the comparable period in 2008. However, profit before tax dropped by 29% due to increases in employment costs, operating costs, finance costs and amortisation.
“Vox borrowed quite a lot of money to fund its acquisitions and the cost of borrowing increased more than it anticipated,” says Frost & Sullivan ICT industry analyst Lindsey Mc Donald. “It’s re-assessment of amortisation on its customer base also had a significant impact on the earnings per share.”
Vox’s balance sheet however continues to look strong, with only a slight decrease in the net asset value per share from the comparable period. Despite its extensive acquisition spree, the significant improvement in cash generated from operations during the period means that the company still has a strong bank balance.
Mc Donald says that there is however increased competition in this market, which is placing downward pressure on prices and could affect future cash flows.
“It’s becoming more and more difficult for operators to achieve margin and to differentiate themselves,” Mc Donald says. “It’s a challenge to companies like Vox to demonstrate why a client should choose them and not someone else. I think we’re likely to see an increase in the bundling of services in the local telecommunications market because of this.”
The Vox Telepreneur programme, which allows small and medium enterprises (SMEs) to effectively become telecoms operators by re-selling Vox services, has continued to be successful for the company. Vox Telepreneur now has 3100 dealers and over 7000 customers. Average Revenue per user also increased to R276, up from R262 in the last reporting period.
Mc Donald adds that Vox’s innovative direct selling model remains a competitive advantage. The company’s size also means that it can also be quite flexible.
“SMEs still offer opportunities for growth,” she notes. “Neotel hasn’t been able to live up to all of its promises on its SME offering, so Vox has an important role to play there.”
She expects that the company will be moving into the provision of managed services such as data storage and VPN in the near future.
“It’s the way that most telecoms operators are moving,” Mc Donald says. “This is a way to ensure that they don’t just earn usage revenue, but service revenue as well.”
Vox Telecom financials – give your views
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