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Telekom Networks Malawi profits despite market pressures

Telekom Networks Malawi profits despite market pressures

Telekom Networks Malawi (TNM) has elevated itself above the country's high inflationary environment and absorbed the impact of high exchange and interest rates to post a 52% rise in after-tax profits, underpinned by a 13% growth in mobile subscriber numbers and firming service revenues.

TNM's subscriber base has increased to over 3 million and the company claims to have 47% market share. The telco raised its revenues by 13% to US$88 million.

"A high inflation environment, high interest rates and the impact of volatile exchange rates on our significant foreign currency denominated expenditure continued to drive increased costs for the operation," said Douglas Stevenson, CEO of TNM.

After-tax profits for the period increased 52% to just above US$11 million. The company also undertook capital investment of about US$12.4 million during the year under review and it said this was mainly used in the roll out of LTE internet platform, as well as the expansion of capacity and coverage in Lilongwe and Blantyre.

Although the current levels of profitability are encouraging, TNM requires a significantly higher level to ensure the sustainability of future investment in infrastructure expansion projects and the upgrade of its technology and further coverage expansion.

Fixed broadband, mobile broadband and tech upgrades within the Unified Communications space are all areas of investment for the company.

Average Revenues Per User amounted to around US$2.25 as the Malawian economy continues to face strong headwinds, especially from currency devaluation and other economic difficulties.

The company also has a largely foreign currency denominated expenditure base and it expects the economic situation to worsen going forward.

"The macro economic environment is expected to remain challenging putting pressure on margins and service revenue and management will continue to pursue cost efficiencies to protect margins," said the company.

According to the Malawi and Mozambique Telecommunications Report Q4 2016, recently published by Business Monitor International, TNM stands to benefit from its investment in an LTE network.

"Telekom Networks Malawi's launch of LTE will improve broadband connectivity and quality across the country. However, the low penetration of mobile services and the challenging macroeconomic environment will inhibit the uptake of 4G services," says the report.

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