2009 has been another significant year in the evolution of Vox Telecom. Despite the downturn in the South African economy resulting in tough trading conditions as well as an extremely competitive telecommunications market, Vox has performed well and remains the leading alternative telecommunications service provider servicing the South African market.
PERFORMANCE
We have increased our revenues 13% to R2.082 billion and increased our profit for the year 60% to R60.7 million. We now provide telecommunications services and products to over 16,000 corporate customers and over 145,000 consumers and continue to be a leader in driving the deregulation and liberalisation of the South African market.
INTERNAL FOCUS
This year we have focused on the internal operations of Vox Telecom and its operating subsidiaries. We have consolidated operations, rationalised office infrastructure, re-organised people and teams and consolidated network and software platforms. During the year we closed down Vox Exchange, which was set up as a buying group of IT equipment to support our channels. We felt this business was not delivering against expectations and have now completed this rationalisation. We also completed a major upgrade of our data centres and core network infrastructure with the roll out of Juniper routers to replace our Cisco equipment. This has not only enhanced the quality of our core network infrastructure, but also provided us with increased capacity for our voice and data traffic.
We have increased the capacity of our physical network interconnects with the major mobile operators and continue to experience significant growth in our interconnect traffic, which we expect to continue. During the year we also upgraded our software platforms and ensured that our customer care, billing and provisioning systems can support the growth of our business. We will continue to invest in our network and software infrastructure to ensure we can offer carrier-class voice and data services to our customers.
REGULATION
This year has been marked by some changes to the regulation of the telecommunications sector. Most notably a new Minister of Communications was appointed, Honourable General Siphiwe Nyanda, who has brought an increased focus on key issues affecting pricing and competition.
In particular, in conjunction with the Parliamentary Portfolio Committee for Communications (PPCC), the Minister has turned his attention to wholesale Mobile Termination Rates (MTR). Interconnection is a complex topic that is not well understood, but the end result is that, effective March 2010, there will be a 36% reduction in the wholesale mobile termination rate paid by Telkom to the mobile operators.
Further reductions in wholesale mobile termination rates will be implemented in 12-month cycles thus providing a multi-year glide-path for a gradual reduction of wholesale rates. This will result in a reduction in the retail tariff paid by Telkom users on the landline network when they call mobile numbers.
Although there is an expectation that retail mobile tariffs will also go down, our expectation is that this will be marginal given the negative impact of lower wholesale rates on the profitability of the mobile operators. Vox Telecom supports a reduction in wholesale interconnect rates, but we believe that deregulation needs to be looked at in a holistic fashion. In order to level the playing field for all market participants, ICASA, the DOC and the Minister need to ensure the rapid implementation of Local Loop Unbundling, Carrier Pre-Select and most importantly Local Number Portability. These three changes will have the most dramatic impact on the telecommunications market and will stimulate competition, increase consumer choice and ultimately lead to more competitive prices for all users of telecommunications services in South Africa. Vox has been a leader in driving the de-regulation and liberalisation of the SA market and we will continue to lobby parliament, the DOC, the Minister and ICASA for the benefit of all South Africans. It is our hope that the above regulatory hurdles will be dealt with over the next calendar year.
DEALSTREAM
In the prior fiscal year we reported on the impact of the Dealstream events on Vox Telecom. Dealstream has now been placed in liquidation. We have registered and proved our claims as a creditor of Dealstream, but believe there is no prospect of the recovery of any funds. There is no further impact on Vox Telecom as a result of Dealstream except for professional fees through our interaction with the liquidator.
CORPORATE GOVERNANCE
During the year in review the Board of Vox Telecom has made a number of changes to align the board with the new King III guidelines and the implementation of the new Company’s Act. In this regard we have re-structured the board to ensure a majority of nonexecutive directors. We now have an eight person board with 3 non-executive directors, 2 non-executive independent directors and 3 executive directors.
In addition, I have taken over as an independent, non-executive Chairman and Doug Wallace has been appointed as Chairman of the Audit and Remuneration Committees. Further disclosure is provided in this Annual Report on the composition of the Board and our various sub-committees, but I am pleased to report that we have made significant progress in ensuring that Vox not only complies with best practice, but is also viewed as a leader in this regard relative to other JSE listed companies.
THE FUTURE
Vox Telecom continues to have a major impact on the telecommunications landscape in southern Africa through offering innovative products and competitive pricing. We have made great progress as a business over the past year, but are cognisant of the fact that we are operating in a difficult economic environment this is further complicated by regulatory uncertainty and fierce competition in all the market segments in which we compete. We will continue to innovate in a commoditised market and ensure we leverage the maximum value from our voice and data assets and grow our market share across all our market segments.
I would like to recognise our employees and executive team for their outstanding contribution in 2009. I would also like to thank our customers, partners, distributors, resellers and professional advisors for their dedication and commitment to Vox Telecom. In closing I would also like to thank the Board for their support and guidance. I look forward to reviewing our performance with you next year.
PERFORMANCE
We have increased our revenues 13% to R2.082 billion and increased our profit for the year 60% to R60.7 million. We now provide telecommunications services and products to over 16,000 corporate customers and over 145,000 consumers and continue to be a leader in driving the deregulation and liberalisation of the South African market.
INTERNAL FOCUS
This year we have focused on the internal operations of Vox Telecom and its operating subsidiaries. We have consolidated operations, rationalised office infrastructure, re-organised people and teams and consolidated network and software platforms. During the year we closed down Vox Exchange, which was set up as a buying group of IT equipment to support our channels. We felt this business was not delivering against expectations and have now completed this rationalisation. We also completed a major upgrade of our data centres and core network infrastructure with the roll out of Juniper routers to replace our Cisco equipment. This has not only enhanced the quality of our core network infrastructure, but also provided us with increased capacity for our voice and data traffic.
We have increased the capacity of our physical network interconnects with the major mobile operators and continue to experience significant growth in our interconnect traffic, which we expect to continue. During the year we also upgraded our software platforms and ensured that our customer care, billing and provisioning systems can support the growth of our business. We will continue to invest in our network and software infrastructure to ensure we can offer carrier-class voice and data services to our customers.
REGULATION
This year has been marked by some changes to the regulation of the telecommunications sector. Most notably a new Minister of Communications was appointed, Honourable General Siphiwe Nyanda, who has brought an increased focus on key issues affecting pricing and competition.
In particular, in conjunction with the Parliamentary Portfolio Committee for Communications (PPCC), the Minister has turned his attention to wholesale Mobile Termination Rates (MTR). Interconnection is a complex topic that is not well understood, but the end result is that, effective March 2010, there will be a 36% reduction in the wholesale mobile termination rate paid by Telkom to the mobile operators.
Further reductions in wholesale mobile termination rates will be implemented in 12-month cycles thus providing a multi-year glide-path for a gradual reduction of wholesale rates. This will result in a reduction in the retail tariff paid by Telkom users on the landline network when they call mobile numbers.
Although there is an expectation that retail mobile tariffs will also go down, our expectation is that this will be marginal given the negative impact of lower wholesale rates on the profitability of the mobile operators. Vox Telecom supports a reduction in wholesale interconnect rates, but we believe that deregulation needs to be looked at in a holistic fashion. In order to level the playing field for all market participants, ICASA, the DOC and the Minister need to ensure the rapid implementation of Local Loop Unbundling, Carrier Pre-Select and most importantly Local Number Portability. These three changes will have the most dramatic impact on the telecommunications market and will stimulate competition, increase consumer choice and ultimately lead to more competitive prices for all users of telecommunications services in South Africa. Vox has been a leader in driving the de-regulation and liberalisation of the SA market and we will continue to lobby parliament, the DOC, the Minister and ICASA for the benefit of all South Africans. It is our hope that the above regulatory hurdles will be dealt with over the next calendar year.
DEALSTREAM
In the prior fiscal year we reported on the impact of the Dealstream events on Vox Telecom. Dealstream has now been placed in liquidation. We have registered and proved our claims as a creditor of Dealstream, but believe there is no prospect of the recovery of any funds. There is no further impact on Vox Telecom as a result of Dealstream except for professional fees through our interaction with the liquidator.
CORPORATE GOVERNANCE
During the year in review the Board of Vox Telecom has made a number of changes to align the board with the new King III guidelines and the implementation of the new Company’s Act. In this regard we have re-structured the board to ensure a majority of nonexecutive directors. We now have an eight person board with 3 non-executive directors, 2 non-executive independent directors and 3 executive directors.
In addition, I have taken over as an independent, non-executive Chairman and Doug Wallace has been appointed as Chairman of the Audit and Remuneration Committees. Further disclosure is provided in this Annual Report on the composition of the Board and our various sub-committees, but I am pleased to report that we have made significant progress in ensuring that Vox not only complies with best practice, but is also viewed as a leader in this regard relative to other JSE listed companies.
THE FUTURE
Vox Telecom continues to have a major impact on the telecommunications landscape in southern Africa through offering innovative products and competitive pricing. We have made great progress as a business over the past year, but are cognisant of the fact that we are operating in a difficult economic environment this is further complicated by regulatory uncertainty and fierce competition in all the market segments in which we compete. We will continue to innovate in a commoditised market and ensure we leverage the maximum value from our voice and data assets and grow our market share across all our market segments.
I would like to recognise our employees and executive team for their outstanding contribution in 2009. I would also like to thank our customers, partners, distributors, resellers and professional advisors for their dedication and commitment to Vox Telecom. In closing I would also like to thank the Board for their support and guidance. I look forward to reviewing our performance with you next year.
Sincerely,
Vulindlela Cuba
Chairman
November 25, 2009