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TeleMasters halves its quarterly dividend
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Thabiso Mochiko
Business Day
Monday, July 05, 2010
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Uncertainty around the regulation of interconnection fees has forced TeleMasters — the first AltX-listed firm to declare quarterly dividends, in August 2008 — to halve its quarterly dividend payout to 2c per share.
“Due to the flux in the market and the cessation of commission incentive bonuses, the board of directors deem it prudent to decrease the dividend per share by 2c per share compared to the previous quarter to see the company through its transition to a full telecommunications provider,” CEO Mario Pretorius said on Friday.
The incentive bonuses include discounted handsets and other things such as free TVs that the operators use to lure customers into signing two-year contracts.
TeleMasters provides least-cost routing services to help companies cut their telecoms bills by switching calls made from landlines to the cheapest network.
As the cost of cross-network calls falls, there will be less need for least-cost routing services, so providers that offer them as their sole service are under threat. The interconnection rates were reduced from R1,25 to 89c in March, with more reductions proposed.
The industry is waiting anxiously for the Independent Communications Authority of SA (Icasa) to make a final decision on further reductions following its hearings last week.
TeleMasters receives the bulk of its earnings from least-cost routing services, but it is diversifying into other areas. Since interconnection fees are expected to result in lower retail fees, including the least-cost routing rates, that could drag TeleMasters’ earnings down.
“Currently there is no sign of when final retail tariff pricing for the LCR (least cost routing) industry will be confirmed, and the reduction of Telkom’s rates are impacting on us and we have seen a jump in businesses closing down,” said Mr Pretorius. “The number of lines installed is growing but there is a definite drop in call volumes, perhaps caused by a slowdown in business for the Soccer World Cup celebrations.”
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