JSE-listed telecommunications specialist TeleMasters Holdings has reported an operating loss of R5,5m in the year ended 30 September 2012 from a profit of R14,4m last year.

The decline in operating profit came on the back of a sharp fall in revenue, with sales slumping from R268,1m in 2011 to R171,3m in 2012.

The poor performance was as a result of customers ending contracts for least-cost routing (LCR) solutions that had made more sense when call termination rates — the fees operators charge to carry calls onto their networks — were higher. The fees have been coming down annually for the past three years and will reach of low of 40c/minute for mobile calls in March 2013.

Revenue from LCR fell by 36%, TeleMasters says.

The company is converting LCR clients to a new technology platform called Digital Direct. “Over the past year, the group has tested and amended this technology to the point that it is now satisfied that this technological offering is of the highest quality for voice communications.”

To counter the negative effects of the loss in LCR revenue, TeleMasters has cut costs, including via retrenchments and voluntary cuts by directors in their salaries.

“The business has been realigned for a change in how it operates as many skills needed to embrace the Digital Direct communications solution are different from those applied in the past,” it tells shareholders. “The downside of Digital Direct is that it requires a far higher capital installation cost. This is reflected in the fact that the group has invested R7,3m in equipment and software over the past year when compared with the R2,7m in the 2011 financial year.”

TeleMasters managed to eke out a tiny net profit of R22 707, down from R10m a year ago. The net profit includes a gain on derecognition of a liability of R5,4m before tax. — (c) 2012 NewsCentral Media