Business

Angola Telecom forecasts a profit for first time in eight years

Colin McClelland

Angola's state-run phone company looks set to make a profit after receiving a $314-million government bailout.

Angola is ranked 179th of 189 countries in the World Bank's Ease of Doing Business Index.  (Reuters)

Angola Telecom, the African country's state-run phone company, is on track to make a profit for the first time in eight years after receiving a $314-million government bailout to fund debt payments and boost sales.

Years of equipment neglect and lax bookkeeping of more than 300 bank accounts meant the company only collected about a quarter of the $190-million it was due in phone bills in 2011, chief strategy officer James Wilde (43) said in a February 17 interview in Luanda, Angola's capital. That changed after the government intervened in November 2012, allowing the company to increase revenue collection, repair and extend fibre-optic lines and plan to start its own mobile-phone network, Wilde said.

"Our first priority was to stop the bleeding and make sure the patient was breathing," Wilde said as he navigated dense Luanda traffic in a Land Rover Defender. "We closed bank accounts, increased collections and developed short-term revenue streams while we upgraded the service."

Angola, Africa's second-largest oil producer behind Nigeria, is increasing telecommunications capacity to help diversify its $114-billion economy away from offshore crude oil production, which accounts for almost all exports and 80% of tax revenue. It plans to help companies become more efficient with better phone and Internet service while improving rural access to education and health care. Angola ranked 179th of 189 countries in the World Bank's Ease of Doing Business Index benchmarked to June 2013.

Mobile License
Angola Telecom, which last made a profit in 2007, is forecasting net income of $5.89-million in 2015, compared with a loss of $40.7-million in 2012, according to financial statements provided by Wilde, a US citizen. It has a revenue collection target of $300-million in 2015.

The company plans to secure a mobile-phone frequency license over the next year, Wilde said. It will compete with Unitel SA, the country's largest mobile-phone operator part- owned by Africa's richest woman, Isabel dos Santos, the daughter of President Jose Eduardo dos Santos. Unitel had 9.8-million subscribers as of March 2013, or about 75% of the market, according to a report by Paul Budde Communication, an Australian company.

Its other main competitor is Movicel Telecomunicacoes SA, which was spun out of Angola Telecom in 2010. The company is 40% owned by closely held Portmill Investimentos e Telecomunicacoes, run by Angolan army generals including Leopoldino Fragoso do Nascimento, according to a February 2013 report by the Berne Declaration. Angola Telecom still has an 18% stake in Movicel.

Occasional Dividends
"When Movicel was privatised it left Angola Telecom without a revenue stream, aside from occasional dividends," Wilde said. "We need a mobile license to survive."

Competition from a third mobile operator could accelerate growth in an already booming Angolan market, which has increased penetration to 64% from 2% since 2003, Paul Budde said. Multinational operators including South Africa's MTN Group and Vodacom Group have expressed interest in a mobile license, Budde said. Angola Telecom's reorganisation is a step toward eventual privatisation, according to the report.

Angola Telecom more than doubled revenue collection from 2011 to $119-million in 2012 and liquidated all short-term debt, the financial statements show. The company plans to quadruple its number of sales offices to 200 this year and offer a voice and data Wi-Max service called Talk and Navigate, Wilde said.

Billed Correctly
The company, which owns 51% of Angola Cables, will repair the damaged undersea Adones link, which was laid by Ericsson AB from Namibia to the oil-rich Cabinda province in the north of the country, Wilde said. Fiber-optic cables destroyed by road works following a 27-year civil war that ended in 2002 will also be fixed, he said.

Angola Telecom is also investigating whether carriers such as Unitel, Movicel and international operators were billed incorrectly for millions of calls over years because the country's two switches that tabulate the costs were broken, Wilde said. New invoices will be sent to collect the correct fees calculated since the machines were repaired in May.

Angola Telecom is also investing in recruitment and training for its 1 200-strong workforce, which has an average age of more than 50, Wilde said. The company needs to hire 300 new people, he said.

"They don't want to change and it's hard for them to understand the new concepts so it's no wonder productivity is low," he said. "This is the hardest challenge we face." – Bloomberg

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