JSE-listed TeleMasters is diversifying from its pure-play least-cost routing focus and now also offers broadband services.
In the company's commentary on its financial results for the six months to March, it says it is confident about its future prospects, as it converts its traditional least-cost routing business to a fully-fledged licensed operator.
TeleMasters competes against companies such as the Huge Group, Vox's Orion subsidiary, Nashua Mobile and Altech Autopage in the least-cost routing arena. The sector has been under strain since the interconnect rate was decreased.
In the six months to March, the company grew revenue to R158 million, from R117.5 million, while profit leapt to R6.6 million, from R3.6 million a year ago.
However, the loss of connection incentive bonuses from cellular operators saw this income stream drop from R4.6 million last year to R5 150.
During the last financial year, the company decided not to renew two-year fixed-term contracts with the mobile operators, which led to declining income from connection incentive bonuses.
New income stream
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 TeleMasters to self-provision and enter the broadband space.
From the beginning of this financial year, TeleMasters started selling services as a full telecommunications operator, it notes.
In its annual report, it says it will continue to focus on organic growth in the least-cost routing market and capitalise on the rapid growth in the broadband market. The diversification is expected to enhance its future earnings capability.
“The market segment of fixed mobile communication is rapidly shrinking and we are poised to make the transition to sustainable and profitable telecommunications services,” it says in the report.
TeleMasters increased its doubtful debt provision from R424 958 at the end of the year to R3.7 million at the end of March, because of changes in “operational risk and the continuing poor market conditions,” it says.
The company is in the process of delisting from the JSE, because of low levels of trade in its shares and as it does not need to raise capital. In the last financial year, this move was approved by the board.
TeleMasters 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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