Moves to improve operational management, internal controls and cash flow management have seen the company turn the corner from the difficulties of the year before caused by its relationship with Dealstream.
Vox released annual results yesterday, revealing a 13% growth in revenues over the previous year to R2.1 billion. EBITDA was 11% higher at R201 million, and earnings per share climbed 45% to 5.49 cents. Operating profit was however down by 3.5%. Vox Orion remains the largest contributor to group revenues, although it showed little growth over the previous year.
“Vox has started its comeback from the Dealstream debacle that severely affected its bottom line,” says Frost & Sullivan ICT industry analyst Protea Hirschel. “We now expect it to start developing at least part of its own physical infrastructure to reduce reliance on the incumbents. This will set it up well for future growth in a less regulated environment.”
Vox has already converted its VANS license to an ECNS license, allowing it to offer fully-fledged telecommunications services. However, the pace of regulatory change in South Africa is still slower than the company would like.
“Regulatory uncertainty around local loop unbundling, carrier pre-selection and geographic number portability are challenges that the company can do little but wait out,” Hirschel says. “Telkom’s recent poor results also suggest that it may be more reluctant to do things that will further threaten its market share. This will inevitably impact on Vox.”
The one area in which regulatory reform in South Africa seems to be focused, will ironically have a negative impact on Vox’s revenue streams.
“Vox’s least cost routing products are based on the existence of interconnection fees,” Hirschel explains. “Lowering of interconnection fees therefore represents a threat to its business model and will put pressure on profit margins. Although profits can still be realised at an interconnection fee of 40 cents, the company will have to adapt.”
Hirschel adds that long as price differentials exist between other operators though, Vox’s competitive pricing has a role to play in the market.
“The company’s main competitive advantage will remain in its pricing models,” she says. “In this period, it extended its service offering in this area by introducing the Telco Toolbox, allowing customers to better manage telecommunications expenditure. It is this extended range of services for increasingly price conscious customers that set it apart.”