iBurst downscales expectations

By Christelle du Toit, ITWeb senior journalist

Johannesburg, 11 Feb 2008

Wireless broadband provider iBurst forecasts a "challenging" year and has, therefore, reined in its sales targets by 10%.

iBurst MD Alan Knott-Craig Junior says the fluctuating rand, rising interest rates and stock market volatility led him to make the decision.

"We are going to be less aggressive in terms of our sales targets, which have been adjusted downward by about 10%," he says. " We are also going to be more conservative in terms of costs, as a lot of our expenditure is in dollars."

Knott-Craig Jnr recently caused a stir when he sent a letter to his employees, encouraging them to be positive about SA. In the letter, he said pessimistic sentiments about the country were part of a "normal wave of negativity".

"It happened in 1989, when SA defaulted on its international loans and the stock market and rand crashed; it happened in 1994 when the ANC took power and everyone thought war would break out; it happened in 1998 when interest rates hit 25% and you couldn't give away your house; and it happened in 2001 when a fairly unstable guy, by the name of Osama, arranged for two Boeings to fly into the tallest buildings in New York!" he wrote.

"I think 2008 will be a tough year, but I also see it as a great opportunity to seize the day while everyone else is whingeing and get a front-seat on the inevitable boom that we'll experience in 2009, 2010, and beyond."

Knott-Craig Jnr says this sentiment is carried through to his outlook for the business as a whole, but "I am not some kind of crazy optimist - we have got problems".

"Our biggest challenge with power cuts, for example, is network maintenance as UPSes need time to charge and can only be charged so many times, so we are looking at reducing the life expectancy of our UPSes."

However, he says the company predicted the situation a number of years ago, which is why the majority of its base stations are already equipped with generators.

Time to spend

In the meantime, 2008 will be a year for intensive capital expenditure, as the company wants to roll-out 10 to 20 new base stations a month, at an estimated cost of R1 million each.

"The shareholders are very bullish on this," says Knott-Craig Jnr. "Our only limitation is acquiring sites. At this stage we already have no real congestion and enough redundancy. Basically all our capex expenditure this year is going into rolling out more base stations."

Knott-Craig Jnr expects elements such as the newly-implemented National Credit Act to impact positively on his business.

"People are not able to buy houses and cars so they have more expendable cash," he explains. "For example, we saw a surge in broadband uptake during the time that the national lottery was down last year. People had more money to spend."