Telecommunications network equipment distributor and integrator Vodatel Networks Holdings hopes to compensate for an 'inevitable' fall in profit margins by increasing sales volume. The fall was inevitable due to a rise in the broadband Internet protocol metropolitan access network (IP Man) sector which commands lower profit margins, said managing director Richard Yim Hong after the annual shareholders meeting. The Growth Enterprise Market-listed company mainly serves mainland telecoms operators. Overall gross profit margin and net profit margin fell to 27.2 per cent and 14.7 per cent respectively in the year to June 30, from 29.3 per cent and 16.2 per cent in the previous corresponding period. Turnover grew 13.4 per cent to HK$546.91 million in the year as net profit rose 3.3 per cent to HK$80.8 million. 'Broadband IP Man products' profit margins cannot be as high as those of DDN [digital data network], ATM [asynchronous transfer mode] and frame relay as there are many system integrators selling IP Mans,' Mr Yim said. IP Mans are different from DDN, ATM and frame relay in that they enable Internet applications such as video-on-demand, distance learning and electronic commerce. However, Mr Yim said IP Mans had better market potential in the long term, as it allowed residential applications, while the other networks were used mainly by the corporate and government sectors. 'Margins [for IP Mans] are low, but the potential business will be much higher,' he said. Vodatel Crossland - a joint venture with Australia-based e-commerce solutions provider Crossland - was expected to help boost future profit margins, he said. However, the venture incurred a HK$2.15 million loss in the year to June 30 on Vodatel's books. Mr Yim blamed the loss on poor market sentiment which he said was 'unhealthy'. 'Under such a market environment, companies like [Vodatel Crossland] cannot perform well. It's like you can only fetch 50 HK cents for something that is originally worth 50 HK cents.' The venture had provided terminals and software to Bank of America and the Macau Jockey Club to facilitate online stock trading and online betting. Vodatel had about HK$194 million worth of uncompleted orders. Mr Yim said the company had no plan to move its listing to the main board despite a poor share price performance and thin trading volume, but it would not rule out future co-listings in other markets.