Alternative Networks says roaming changes will hit profits

Comms VAR says lowered non-EU roaming tariffs from mobile operators will take toll on its profitability

Alternative Networks is expecting a slump in profits for its first half of 2016, owing to increased network competition and changes to global tariffs from mobile carriers.

For its six months to 31 March 2015, Alternative's adjusted EBITDA was £10.3m on sales of £73.9m.

However, according to a trading update released yesterday, the comms and IT VAR expects revenues to be flat for the six months to 31 March 2016, but gross profit to be double digits lower than the same period last year, meaning its EBITDA will be down year on year.

Alternative attributed this expected fall in profits to new global tariffs from the carriers and said in a statement it is very exposed to these changes.

"This impact is being seen across the UK mobile market but Alternative has been particularly impacted due to its comparatively larger roaming base," the statement said. "Historically, the group has generated a large proportion of mobile profits from roaming in both voice and data, particularly from outside the EU, as demonstrated by the comparatively high ARPU (average revenue per user)."

Speaking to analyst Megabuyte, Alternative's CFO Gavin Griggs said the three main operators have put in place "significantly lower non-EU roaming prices, including the types of all-you-can-eat for a single daily charge packages now common for EU roaming".

The analyst said the update falls at a time when Alternative was beginning to achieve real momentum.

"For Alternative, this setback comes just when the company was starting to produce meaningful organic growth, and the new analyst forecast represents quite a reduction in EBITDA given the high margins associated with non-EU roaming fees," it said.