JSE-listed TeleMasters has slumped into a loss after its revenue declined substantially in the first half of the year.
The group yesterday reported a decline in revenue from R71.8 million a year ago to R43.7 million for the six months to March. It made an after-tax loss of R1.9 million, compared with a profit of R3.2 million a year ago.
However, its operating expenses were almost flat, at R7.8 million, compared with R7.95 million a year ago, leading to an operating loss of R2.3 million, compared with a gain in the first half of last year of R5 million.
TeleMasters says, as part of its bid to drive down costs, directors' pay has been cut by 33% until the group returns 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.”
TeleMasters, which recently canned plans to delist from the bourse, operates throughout SA, with offices in Gauteng, KwaZulu-Natal and the Western Cape. The company has been moving towards becoming a fully-fledged network operator as the least-cost routing (LCR) sector was hit by lower margins after mobile termination rates were cut by the telecoms regulator.
In its commentary on the results, TeleMasters says the second quarter's results reflect management's expectations that 2012 would be a “tough transitional year”. It says its traditional least-cost routing turnover dropped 41% over the corresponding previous period as it lost two large clients that reached the end of their contracts.
“The LCR model no longer makes sense as the new interconnect rates have squeezed the margins out of the old technology,” it says.
TeleMasters says the challenge is to convert its 600 clients to its new service, which is taking longer than expected due to “reliance on third-party fixed-line service providers' interconnect implementation and delays with the porting of telephone numbers to TeleMasters”. It expects to see margin gains as the interconnect agreements have been concluded, it says.
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