JSE-listed TeleMasters has moved back into profitable territory, year-on-year in the three months to December, despite lower revenue.
The company says it has benefited from lower operating costs, due to cost-cutting efforts implemented in the previous year. Operating expenses came in at R6.8 million, compared with R8.1 million in the three months to December 2011.
TeleMasters reported revenue of R33.3 million, compared with R56 million in the previous corresponding period. However, it made a total gain of R206 065, compared with a R1 million loss, and improved basic and headline earnings per share to 0.49c from a loss of 2.50c.
In its results commentary, it says the first quarter results "reflect management's expectations of lower operating costs resulting from the cost-cutting efforts implemented in the previous year".
TeleMasters has been in the process of moving its customers onto its own network - Digital Direct - as it moves away from LCR. Several LCR providers were hard hit when mobile termination rates started dropping after the Independent Communications Authority of SA (ICASA) introduced a glide path.
In 2010, ICASA decreed that cellular interconnect costs had to drop to 73c at peak and 65c during off-peak times, from March 2011. Last year, rates dropped to 56c and 52c, respectively. At the end of this March, wholesale mobile termination rates dropped to 40c, regardless of the time the call is made.
TeleMasters has said the LCR model no longer makes sense. Lower termination rates means that some players in this sector have seen erosion of their margins.
The company says the ongoing growth of revenue using Digital Direct continues to grow.
"Our revenue has fallen in the current quarter compared with the past in line with the circumstances set out in our last integrated report. This decline was mainly attributable to services previously provided using the least-cost routing technology stopping, as larger tenders were not renewed."
However, despite the loss of LCR, the group is benefiting from higher margins, which are expected to continue, leading to a more profitable position compared to previous years. "The directors are confident that the sustainability of the group's operations has been achieved and expect operating results to systematically increase in each coming quarter."
TeleMasters stock closed flat at 75c on Friday.
Share