 |
Vodacom Group Limited Annual Report - for the year ended 31 March 2009 |
|
Group overview
|
Performance review
|
| Curently viewing: Gateway » Next: Sustainability review |
|
|
| Gateway
Highlights
Vodacom Group acquired Gateway on 30 December 2008. Gateway is Africa’s largest provider of satellite and terrestrial network infrastructure and interconnection services for African and international telecommunications companies. Gateway also provides an extensive range of high quality, end-to-end connectivity solutions to multinational corporations operating across Africa. Gateway services customers in 40 countries and employs 389 people in 14 offices throughout Africa and four European offices. Gateway’s results for the quarter ended 31 March 2009 have been included in the Vodacom Group’s results for the first time. Gateway posted revenue of R808 million and EBITDA of R100 million for the three-month period. Overview Technology and communications tend to demonstrate relative resilience in tough economic times. While the impacts of the global economic crisis will be felt for some time to come and Africa has not been spared, Gateway has delivered good growth. In the rapidly evolving landscape of African connectivity, we continue to broaden our reach by moving into new markets and enhancing our service offerings in our existing markets. In the year we opened new offices in Nairobi and Kampala and will be expanding our team in these markets. Spending on African IT and telecoms services is set to grow at significantly higher rates than in G20 countries. Investments in banking and corporate ERP systems will continue to drive industry growth. We expect the need for connectivity to continue to increase due to demand for core business applications, eBusiness services, and Point-of-Sale applications, such as ATMs and POS terminals and forecourts. Opportunities for growth exist across a number of sectors in Africa, including oil and gas, banking and finance, and retail which are all expected to show growth. Gateway is well placed to provide local, regional and international businesses with the necessary communications infrastructure to run their business more effectively and efficiently despite the challenges posed by the lack of infrastructure in Africa. Some specific examples of sector opportunities include our work with Nigerian banks expanding into rural areas, and oil companies who require solutions to enable workers to communicate with their families far away. In the banking sector, African banks are making inroads in respect of the 230 million unbanked households in rural areas by employing advanced satellite technologies. Gateway works with 22 of Nigeria’s 25 largest banks, to enable secure and reliable connectivity services in metropolitan and rural areas where banks were unable to operate previously. African mobile network operators (MNOs) are investing in expanding their operations. Increasingly, MNOs are collaborating to share network infrastructure and reduce the cost of expanding their networks. Gateway is becoming recognised as the carriers’ carrier, providing flexible resources and cost-effective access to satellite capacity, with operators using Gateway’s own points of presence (POPs) to provide inter-POP communications. Operators can supplement their own connectivity from Gateway’s extensive infrastructure as they require, thereby containing the expense of network expansion. Mobile data is an important growth driver for Gateway. The GPRS, EDGE and 3G networks that have been deployed in African countries are experiencing strong take up as MNOs pursue the opportunities of data communications and ICT convergence to build additional revenue streams. Products and services Carrier voice services Gateway offers African interconnection to international operators for the completion of calls originated internationally, as well as international network connection for African operators for the completion of international calls. Carrier voice services include intra-Africa network connectivity for the completion of calls between African operators. Carrier data services Gateway’s data services include national connectivity to allow mobile operators to connect switches and cell sites within a particular country. International leased-lines for voice, data and signaling traffic are provided. Gateway offer high speed internet connectivity to mobile operators to support the roll-out of GPRS and 3G services. Gateway designed Africa IPJetDirect for African MNOs who provide GPRS, EDGE or 3G services. Africa IPJetDirect provides high speed, low latency internet connectivity with the highest levels of quality, connectivity and efficiency. The main benefits for MNOs are higher revenue and profits, lower operating expenditure and less customer churn. Africa IPJetDirect is delivered by satellite and dedicated to African IP, giving Gateway the ability to deliver hundreds of Mbps of high quality IP connectivity to small antennas in a cost-effective way. Business services Gateway offers private satellite networks (VSAT) to major multinational corporations for their IT applications, data and voice communications. These services include managed data network services using MPLS, Frame Relay and ATM for business critical communications and access to Gateway’s e-Commerce services. Corporate internet access is provided via both satellite and terrestrial transmission links. Gateway is rolling out broadband wireless networks in the 10.5GHz frequency band to provide last-mile access in urban areas as a cost-effective and reliable alternative to fibre and microwave services, and to replace our 5.8GHz wireless links. We are expanding our international MPLS network to all our African points of presence, to provide high capacity access to multinationals operating across Africa. In the year we launched AfricaConnect for Retail, to provide a more affordable connectivity option which is achieved through high utilisation of low bandwidth, where always-on internet is not required. Retail outlets, shopping malls, gas stations and major eateries can use AfricaConnect for Retail for all their transactional applications, such as Point-of-Sale and ATMs. The service can also be used as a back-up when the primary link goes down. This is often a terrestrial link and can be difficult to repair quickly in remote locations. Financial performance Vodacom’s annual results for the year ended 31 March 2009 include Gateway’s results for the three months from the date of acquisition on 30 December 2008 to the financial year end. Revenue and EBITDA for the three month period were R808 million and R100 million, respectively. Operating profit for the period was R33 million, impacted by the amortisation of intangible assets of R46 million largely relating to the value ascribed to the customer bases acquired. The operating profit margin was 4.1% and the EBITDA margin was 12.4% for the period. Capital expenditure in the three-month period was R14 million, representing 1.7% of revenue. Gateway’s financial year end is 31 December. On a proforma unaudited and standalone basis before any consolidation adjustments for the 12 months ended 31 March 2009 Gateway’s carrier services business delivered revenue growth of 14.3% to USD286.8 million. Traffic volumes continued to increase with inbound and outbound traffic minutes increasing 18.5% and 22.3%, respectively. The gross profit growth year-on-year of 2.0% to USD64.0 million was impacted by the global slowdown with lower traffic volumes than planned resulting in under-utilised satellite transponder capacity. Business services revenue was 37.4% higher at USD55.9 million, principally as a result of the continued growth in the Nigerian market. Gross profit continued to grow strongly at 21.9%. The lower gross profit margin was largely due to the growth in the Nigerian market where margins are generally lower when compared to the rest of the region due to higher levels of competition. Management priorities This is an exciting time for African communications markets and Gateway is well positioned to assist our customers to take advantage of the developments. We stand to benefit from the growth expected in Africa in mobile and data communications, underpinned by our strategic focus on high-growth markets and specific sector opportunities. The substantial new international capacity that will be provided by the submarine cable systems as they are brought into commercial service over the next few years will drive demand for bandwidth and services, but will also intensify competition. They will also spur demand for satellite services, which provide redundancy and back-up for fibre, and satellite is still the only way to satisfy the demand for bandwidth in areas where fibre is not yet available. Our focus on realising the growth opportunities open to us will be accompanied by continued efforts to drive efficiencies, which will include identifying and leveraging synergies with Vodacom, and in particular with Vodacom Business – a process which is already well underway. To buttress our competitive advantages, we will continue to invest in developing our network infrastructure, expanding our local presence and offering relevant, innovative and customised services to our customers, hand-in-hand with delivering high-quality pan-African connectivity, most cost effectively. We will be sure to stay responsive to the changing dynamics of our industry to ensure we maintain our leadership positions. Management priorities for the year ahead:
|
||||||||||||||
Gateway has been awarded a USD6 million, two-year term contract to provide Etisalat with satellite cellular
backhaul to connect three major cities in its Nigerian network. In awarding the contract to Gateway, Etisalat
considered criteria such as a track-record of high quality service, secure and reliable networks, and local,
on-the-ground support available throughout the country.Copyright © Vodacom 2009.
|