Johannesburg - AltX-listed Vox Telecom said it will use the lowering of interconnect rates to execute its growth strategy, although its earnings may come under pressure in the short-term.
Following the release of its results for the year to end-August, managing director Douglas Reed said lowered interconnect fees would not have a negative effect on Vox's Orion business unit, which focuses on least cost routing solutions.
Also, the lowered rates favoured the strategy of Cristal Vox, a comprehensive telecoms offering recently launched by Vox - a core part of Vox's future growth plans.
"We can now replace Telkom for our customers and provide our own numbers, competing on an even playing ground," explained Reed. He said that low cost rooting was still a big part of Vox's business, accounting for about 20% of gross profit. However, the arbitrage of rates offered opportunities for Orion, as Vox is focused on converting customers from Orion to the new Cristal Vox division.
"When we convert in minutes we can increase the amount of minutes we get from the same customer base by 300%. This relates to a doubling in revenue," he said. "Interconnect rates are at exactly the right level now to make Cristal Vox competitive without forcing our low cost routing business to dry up overnight.
"We will take short term pain when we convert that business - how much depends how quickly we convert. This will be our focus next year and in 2011 we should get back to high growth rates," said Reed.
Frost & Sullivan analyst Protea Hirschel said Vox may well return to growth in 2011.
"Lowest cost routing is in the Vox Orion business - and that hasn't shown growth in revenue this period. So as a share of overall revenue it has already gone down," she said, adding that in order to return to growth, Vox will have to continue being innovative.
"The economy is recovering, but the environment is getting more competitive which will dampen growth prospects."
Vox posted an annual earnings rise of 53% rise to 6.18c per share. Revenue increased 13% to R2.1bn.