TeleMasters, which is making progress in its transition to a fixed-line telecoms provider, believes it will continue to become more profitable as it moves customers onto its own network.
In the three months to September, it reported lower revenue, which dropped from R30.4 million to R25.1 million, but improved gross and operating profit. However, its net profit dropped from R4.2 million to R1 million due to a once-off gain in the year ago period.
Stripping the once-off gain from its figures for the three months to September 2012, it would have made a net loss.
TeleMasters had been through a tough time as its move from being a least-cost routing (LCR) provider to a corporate fixed-line provider had taken longer to get going than expected. However, its fortunes have being turning, as evidenced at year-end, when it reported net profit 15 times higher in the nine months to June when compared with the year to June 2012.
The group says in a statement it is pleased to have reported a profit, which comes on the back of lower income. "The group is on track to convert and re-capture market share which was lost as a result of the changes to the interconnect pricing model," it says.
Improved metrics
TeleMasters has been moving its customers onto its own network - Digital Direct - as it moves away from LCR. It says its Digital Direct offering has aided its gross margin, which moved to 28.77% from 7.76%.
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 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.
ICASA has since mooted dropping interconnect rates all the way down to 10c in 2016.
TeleMasters says its profitability and sustainability have been "ensured" by the increase in gross margin and a decrease in operating costs.
TeleMasters says it is "clear" the period's operating results show a "substantial" improvement in its profitability and ongoing sustainability. "The board remains positive about the future and believes that the profitability will continue to improve in the coming periods."
The telco declared a 0.5c a share dividend, and its stock last traded at 41c, 9c down on its Friday opening price of 50c.