Competition in Africa hits Altech profit

The company aims to double turnover within the next three to five years from the R9,65bn it reported yesterday for the year ended February.

While Altech reported slight revenue growth, profit fell, with basic earnings per share down 60% to R2,16. Diluted headline earnings per share were down 14% to R4,81.

Hardest hit were its east African businesses, where operating profit fell to R36m from R196m previously. The reduction was attributed to increased competition and the delay in completing two network systems in the region. Altech was forced to impair R275m in east Africa, mainly in respect of the carrying value of operations there.

But Mr Venter expects the business to return to operating profit of R150m-R190m next year on a new contract signed by Kenya Data Networks to carry Bharti Airtel's data traffic. Altech's data centre, which will be operational this year, is expected to contribute.

It had attracted big corporate and public sector clients, said Mr Venter. Altech spent $10m on building the data centre.

Apart from its operations in seven African countries, Altech has a presence in Australia, France and India.

Frost & Sullivan analyst Protea Hirschel said the east African telecommunications market was increasingly competitive. This had resulted in downward pressure on pricing for bandwidth and along the value chain.

Outages in the Seacom cable may also have had a negative effect on the profitability of Altech's east African operations.

Ms Hirschel said because of increased competition, "initial revenue and profit contributions may have been overestimated".

She said the completion of a data centre in Kenya allowed the company to extend its position in the enterprise market, which would be increasingly important.

Mr Venter said Jeffrey Hedberg, who has been appointed chief operating officer, would bring international expertise to Altech's international expansion. Mr Hedberg starts in July and will run all of Altech's operations.

Ms Hirschel said Altech had been laying the basis for diversified revenue streams. "Altech will benefit from the experience of Jeffrey Hedberg in meeting these growth objectives."

Irnest Kaplan, MD of Kaplan Equity Analysts, said Mr Hedberg's international and local experience boded well for Altech's expansion strategy.

Altech's main subsidiary, Altech Autopage, increased revenue 5% to R5,85bn. Operating profit declined 5,3% to R280m. The decline was expected because of the reduction in mobile termination rates. Altech Autopage and its sister company, Altech Technology Concepts, have teamed up to bring converged data and voice services to clients.

Source: Business Day