JSE-listed telecoms company TeleMasters is finding that moving away from being a pure least-cost routing (LCR) business is harder than it thought.
It is shifting away from offering LCR as lower interconnect rates have eroded margins, making the service unsustainable in the long-term. TeleMasters competes against companies such as the Huge Group, Vox's Orion subsidiary, Nashua Mobile and Altech Autopage in the LCR arena.
Companies offering LCR have been under pressure to change their business models and migrate onto new platforms. TeleMasters has refocused and has become a fully-licensed service provider.
However, CEO Mario Pretorius says moving customers onto its own network is “trickier” than the company expected due to the high levels of technology involved. “We are learning as we go along.”
Pretorius says the group had no choice but to move away from LCR because of lower interconnect rates. “The ground was falling away from under our feet.”
The company had to “bite the bullet” and start moving its clients onto its own infrastructure, notes Pretorius. He says TeleMasters has moved a few hundred of about 9 000 customers.
Better margins
TeleMasters expects margins to increase as it migrates more customers. Pretorius says it is “going after much bigger” customers on its new interconnect platform.
TeleMasters bought Skycall Networks during 2010, giving it access to the company's individual electronic communications services and electronic communication network services licences, which enables it to self-provision and enter the broadband space.
In the nine months to June, the group reported revenue up from R174.7 million to R221.9 million. Its net profit was also higher, at R7.6 million, compared with R5 million in the nine months to June 2010.
In a statement to shareholders, the company says it is confident about its future prospects, as conversion from its traditional LCR business to a licensed business “continues to take place”.
TeleMasters is in the process of delisting. Pretorius hopes shareholders will be able to vote in January as the company is still busy with a fair and reasonable valuation. “It's like pulling teeth.”
The company has been listed on the JSE's Alternative Exchange since March 2007. It operates throughout SA, with offices in Gauteng, KwaZulu-Natal and the Western Cape.
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