Like many others in our industry, I’m trying to make sense of the past week’s financial reporting headlines (see below) and I can honestly say there is no real pattern. Results vary between regions, operators and vendors but is it fair to say that the mood is positive?
Saudi Telecom net profit drops by 29 per cent in Q1. The fall in the revenue has been attributed to a fall in international call prices, a rise in fees related to using external networks and an increase in expenses due to capital investments throughout the group.
Turk Telecom posts 88 per cent rise in net profit, however, it has also warned that growth would be below a 5 per cent target this year due to mobile pricing.
TeliaSonera (Sweden) revenue rises 3.9 per cent, while the net profit rose by 6.4 percent, thanks to lower costs. Eurasia continues to be its growth engine.
China Mobile profit growth slows down in Q4 because of an intensified competition and addition of low-income subscribers in rural areas.
Apple’s revenues up 50 per cent in Q2, profit up 90 per cent on back of IPhones sales
Millicom reports better profit in Q1 (Africa), as a result of cost controls and higher value services.
Swedish telecoms group Tele2 reports 3 per cent year-on-year decrease in first quarter net revenues but net profits more than doubled.
Axe Falls Again at Telecom Italia which recently announced a 6.3 percent drop in annual revenues to €27.16 billion (US$36.7 billion), ended 2009 with 71,384 on staff and has since cuts its domestic workforce by about 1,300 positions and plans to cut an additional 4,522 jobs by the end of 2012. And the incumbent is preparing for another year of shrinkage, as it expects its group revenues to fall again in 2010 by 2 to 3 percent.
Dutch telco KPN grew net profit 42 per cent in Q1, as declining domestic earnings were offset by gains at its international unit, however revenues were down 3.5 per cent year-on-year.
ZTE Corporation has reported a 39.68 per cent increase in net profit in the three months ended 31 March 2010 compared to the same period last year. Revenue rose 13.59 per cent compared with the same period last year. During the first quarter, investments in telecommunications equipment in the domestic market remained stable, with mobile network construction and optical communication equipment accounting for a major share of the capital expenditure of carriers. In the international market, the impact of the financial crisis was waning, and ZTE was presented with more opportunities as some equipment manufacturers left the mainstream market.
Softbank has beaten analyst expectations with a 124 per cent rise in full-year earnings, driven by continued strong iPhone sales at Softbank Mobile. It posted net profit of 96.72 billion yen (US$1.04 billion) and 3.4 per cent higher sales of 2.76 trillion yen.
Bharti Airtel, India’s largest telecom operator, today posted its first fall in earnings in three years as cut-throat competition dented margins leading to an 8 per cent drop in net profit.
SAP back on track with storming first quarter, Reports a 97 percent year-over-year rise in profits.
Egypt’s Mobinil profits falls by 2 per cent, has seen a continuation of the intense challenges driven by the global economic slowdown, regulatory pressures, and aggressive competition and in spite of these factors Mobinil continued to grow its subscriber’s base and revenue.
First-quarter net profit of Palestinian incumbent Palestine Telecommunications Company’s (Paltel’s) rose 20.8 per cent to US$32.89 million. The rise has been attributed to the increase in the subscribers’ numbers.
Subex Ltd, a global provider of Operations and Business Support Systems (OSS/BSS) for communications service providers, today announced that it has recorded a revenue of US$96.9 million, and net profit of US$21 million for the year ended 31 March 2010. Year on year growth of EBITDA has been significant. The company EBITDA for FY10 was up by 43 per cent from FY09, and the product EBITDA was up by 75 per cent. (From press release)
For operators showing negative or flat growth there is a distinct push towards lowering costs and,sadly, this usually means retrenchments for quick results and to appease shareholders. We have seen this before, but in a market where vendors appear to be buoyant and combined with the trend for operators to move towards external managed services and an improvement in the world economy, we should see take up of these resources in the short term. However, this will vary from market to market.
Developed markets are experiencing subscriber saturation and hefty competition which usually results in price pressure and subsequent revenue drops. This is combined with the need to continuously invest in the latest infrastructure to keep in front and the associated capital costs are not helping the situation. In some markets, wireless spectrum auctions are back and these are not helping cash flows. Existing operators not keen, or not able, to take up the new spectrum are seeing new players bidding and that can only mean more competition. Thus the cycle continues.
It should be no surprise to see a series of mergers and acquisitions occurring over the next twelve months as non-telcos with large cash hoards looking for an easy entry into the telecommunications space, in some cases, to complete their own portfolios (I don’t want to name any names)! We may also experience some big equity funds seeing the opportunity for quick turn-arounds.
We have already seen national players invest outside their own dwindling national markets, with mixed success. Stratospheric growth continues in the developing markets, but for how long. Indian mobile operators are already seeing price pressures erode revenue and margins.
Should be an interesting period ahead, don’t you think?
Posted
04-30-2010 9:05 AM
by
The Insider