Avanti fails to meet revenue targets, cites corporate caution

African satellite operators Avanti Communications has failed to meet its revenue targets, citing caution on the part of companies taking on bandwidth and new conservative accounting methods.

The news saw Avanti’s share price fall by 16 percent on Wednesday.

The company’s revenue and other operating income for the year ending June 30 rose to $24 million from $9.8 million the previous year, but fell short of the predicted $28.6 million.

Avanti Communications Chief Executive David Williams blamed the failure to meet its target on caution on the part of companies buying bandwidth. “Customers agreeing to multi-year contracts with Avanti are being cautious about taking large amounts of bandwidth in the early stages of these contacts,” he said.

The company said that it had also decided to adopt more conservative accounting treatments for more transactions during the year.

Williams said that the company no longer recognises all of the revenue for contracts immediately, even if all the cash is collected at the beginning of the contract, but instead recognises it over the course of contract.

According to the CEO, the company’s order backlog, which refers to contracts that have not begun yet, increased by 57 per cent over the year to $430 million. However, “the phasing of the backlog is more back-ended than expected”.

Analysts, cutting Avanti’s 2013 revenue forecasts by as much as 30 percent, say Avanti’s loss could have a profound effect on telecoms in Africa since it launched a dedicated satellite for the continent in July to provide broadband internet services to southern and eastern Africa.

Avanti has sold capacity (bandwidth) being used in some eight southern and eastern African countries, from South Sudan to Botswana. Its services are also used by schools and banks in Kenya and mining companies in Zimbabwe.

Avanti was founded in 2002 with a view of serving Africa in view of its fast growth rate. It launched the first satellite, Hylas 1, in November 2010 which covers Europe. Its second is set to cover southern and eastern Africa while the third is set to be launched in 2015 and will serve Nigeria, Ghana and other West African states.

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