Huge satisfied with results says finalising iTalk acquisition

AltX-listed managed telecommunications firm the Huge Group’s FD James Herbst on Tuesday said that while the company was satisfied with its results, it was slightly disappointed that the acquisition of CentraCell had been concluded only in February.

The firm, which listed in August last year, had achieved results exceeding those published in its prospectus. The company increased its headline earnings a share to 44,15c a share for the year ended February 29, compared with 3,48c a share in 2007.

It boosted revenue to R243-million, compared with R30,6-million in 2007, with an operating margin before taxation of 10,35%.

“Naturally we would have liked for the Centracell transaction to have come through a little sooner for the profitability of that to come through, so it was a bit disappointing that we could only close that acquisition on February 15, which meant it had very moderate influence on our result,” Herbst said in an interview.

However, the group said it expected good future performance from the CentraCell acquisition.

“It has taken revenue from R373-million to R573-million. That was the historical impact. Last year TelePassports, which is now Huge Telecomms, grew turnover last year by 26% up to 373-million and obviously it is nice to have the critical mass,” said Herbst.

He explained the company believed it had to have 500-million minutes a year, which would give it the ability to negotiate discounts with the network operators, and the CentraCell acquisition would add to providing it with that critical mass.

OTHER ACQUISITIONS

Meanwhile, Herbst said it was in the process of finalising its acquisition of MTN service provider iTalk Cellular, but that it might have to involve the Competition Commission in this regard.

He explained that in terms of a shareholders agreement signed as part of the original transaction, MTN had passed up its pre-emptive rights in buying iTalk Cellular, but now showed interest in buying iTalk.

Herbst said that it would know within 27 days whether MTN would exercise its pre-emptive rights during a second opportunity provided.

“If they do decide to exercise these rights we will take it to the Competition Tribunal. We see this as a vertical foreclosure, which would be anti-competitive, while it would be pro-competitive for us,” he said.

FUTURE PROSPECTS

The company said that it expected future growth to continue, as managed telecommunications was still an emerging technology and market niche in South Africa.

With the number of network operators and alternative telecommunications companies increasing, the range of technologies and standards widening, and subsequently, the number of routing alternatives expanding, the company expected demand for its services to increase dramatically in the next two years.

The company said managed telecommunication would become an essential service for corporate business in South Africa, and it could sustain organic growth rates in revenue in excess of 20% for the foreseeable future. 

By: Chanel Pringle