LCR sinks TeleMasters
Fixed-line telecoms service provider, TeleMasters on Monday (25 June) announced an operating loss of R2.33 million and R3.72 million for the quarter and six month period ended March 2012, from profit of R5.12 million and R10.19 million respectively.
Quarterly revenue declined to R43.65 million from R71.76 million, while revenue for the six month period slipped to R99.6 million, from R157.99 million in 2011.
TeleMasters reported a diluted headline loss per share of 4.44 cents for the quarter ended March 2012, from diluted HEPS of 7.67 cents, with a diluted headline loss per share of 6.94 cents for the six months ended March 2012, versus diluted HEPS of 15.67 cents in 2011.
“The second quarter results reflect management’s continued expectations as voiced earlier that 2012 will be a tough transitional year. The traditional least-cost routing (LCR) turnover decreased by 41% over the corresponding previous period due to the loss of 2 large clients that reached the end of tender periods,” TeleMasters said.
As reported previously, the group notes that the LCR model no longer makes sense as the new interconnect rates have squeezed the margins out of the old technology.
“We have chosen to move the manner in which we offer telecommunications solutions to clients and have developed a highly innovative service offering which has a built-in redundancy giving us a very competitive edge over similar type but inferior offerings in the market,” it said.
TeleMasters said the challenge is to exceed the loss of revenue with the conversion of 600 long-standing current clients and the acquisition of new clients to the company’s new Digital Direct service.
The group said that the conversions on to the new platform remain slower than expected due to reliance on third party fixed line service providers interconnect implementation and delays with the porting of telephone numbers to TeleMasters.
“The increase in revenue over our new Digital Direct platform has increased 100% when compared to the comparative period and continues to grow. Our added value services which we implemented in the last six months of the previous year have provided additional revenue of approximately 2% of our total revenue when compared to the prior year,” the group said.
TeleMasters said that an additional R4.9 million has been invested since year end in capital acquisitions in order to convert its clients on to its new platform which requires a greater investment than the previous LCR solution required. “As a result of our
interconnect agreements having now been concluded, we will see in the medium
term an improvement in margins as our clients are converted on to the new
platform. This offers better margins at the expense of the larger initial
investment in hardware.”
The group said its operating expenditure has remained constant and efforts to reduce the fixed operating costs would be evident in its next quarter’s results. “We have successfully completed a retrenchment process to reduce staff to be in line with our lower Revenue streams whilst we rebuild our customer service offering.”
As part of the efforts to drive down the group’s operating expenditure the board of directors decreased executive and non-executive directors remuneration by 33% until such time as TeleMasters return the company to profitability. “We remain confident of our ability to do so in the shorter term despite the fact that for all practical purposes we have had to re-invent the company to adapt to changes in the way in which business communicates,” it said.
The board declared a second quarter interim dividend of 1 cent per share on 30
March 2012. During the second quarter of the prior financial year, which ended on 31 March 2011, the company declared an interim dividend of 4 cents per share for that quarter.
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