Go looks to 'good' year after 2008 loss

Telecommunications group Go is dusting itself down after the books plunged to a loss before taxation of €1.3 million from 2007's €27.6 million profit and looking to "a good year in the context of the climate we are in", chief executive officer David Kay told The Sunday Times .

Go plc attributed the loss mainly to two one-off transactions, a €12.9 million pensions provision relating to its predecessor in title Cable and Wireless, and its share of the results of Forgendo Limited to the tune of €15.6 million.

In February 2008, Go and its parent company jointly invested in Forgendo, a special purpose vehicle in Cyprus, to acquire a 34.6 per cent shareholding in Forthnet, a telecoms service provider in Greece. Forgendo is Forthnet's largest shareholder.

Mr Kay said shareholders should look at the business' operations: "Our turnover is growing, despite attacks on all fronts and the inevitable decline in the fixed line voice market. We have still managed to grow the business in normal operations. Profitability has gone up, the margins have gone up. Our cash flows are strong. Everything is growing operationally. Telecommunications is a good business to be in in a downturn. It will suffer, but not as badly as many other businesses."

Mr Kay added he did not expect to see a return on Go's long-term investment in Forthnet in the next few years as it was a start-up business, but losses were reducing monthly and business was growing.

This year, he said, customers can expect more services and more bundles of products as competition and Go itself developed. Go is to announce some bundles for the business community soon and a new billing system is to be introduced next month.

Mr Kay said that with the support of solid IT systems, Go will be in a position to launch more sophisticated products very quickly. The product structure is now also backed by a central call centre manned by a full-time equivalent of 120-130 staff.

The group has shed its inter-national call centre business which it ventured into three years ago as profit margins fell. Mr Kay explained that the company entered into loss-leading contracts which it was hoped would generate new business. Some did come its way, but the operation was very dependent on two large contracts and 20 smaller ones.

"One of the larger clients took its business to Lithuania where the hourly rates are one-third of Go's, although their service quality wasn't anywhere near ours," Mr Kay said. "The other large contract was a merger and takeover, and they wanted to tie it in with their existing operations. Having lost those two big contracts and having these others was taking up a lot of management time involving 15 people. The margins were always very small. It is a fickle business. By getting out of it, we have increased our margins." Go now looks to grow its data centre business. Running three centres locally, and with two submarine cables and an agreement with Vodafone to ensure resilience in case of technical fault, Go believes it is in a better position to take on more clients.

"We have done very well to attract the clients we have already, and this gives us a good basis going forward. It makes Malta more attractive for this type of business," Mr Kay said.

Chairman Sonny Portelli said at the presentation of the results on Friday that he was "comfortable" with the board recommending a "fair and reasonable" final dividend of €0.12 per share for approval at the annual general meeting on May 15 as it will not strain the company's cash flow. He revealed that Go now boasts 456,000 connections on all its services - TV, mobile, fixed line and internet - and has seen an increase of 10,500 connections.

Despite being pressed about the response to the group's final voluntary retirement scheme which closes in May, Go's top brass was typically reticent, saying only that the company had internal targets. Last December, Go said it had 1,350 employees. The competition's staff numbers hover around 350.