Masawara’s annual results for the year ended December 2014, show that Dandemutande, a subsidiary they own, went through a 4th consecutive loss making year, posting of a loss of US $1.2 million. The loss has however improved from the $2.1 million posted in 2013. Dandemutande is the internet provider behind the uMAX and Utande brands.
Dandemutande however managed to increase revenue by 16% and gross margins from 22% to 31%. Positive, but clearly not enough.
Last year, commenting on the 2013 results the directors had said they believed that Dandemutande would break even during 2014. Didn’t happen. Says the company this year: “Although Telerix has continued to register growth in revenues, these have not reached a sufficient scale for the business to be profitable and cash positive.”
Because of the continuous losses, there’s impairment reported on the loans granted to the company in this year’s results.
Dandemutande faces an ever more aggressively competitive market in as far as pricing and, especially, network coverage, are concerned. They also have to grapple with the realities of an increasingly struggling economy where cash is scarce. Maswara is not ruling out further impairment of loans in the future because of what seems to be a bleak future.
Going forward the report says they will rationalise the cost structure of the company and achieve scale. What we hear on the ground is that less than a month ago around 20% of the company’s employees were retrenched. We also hear other developments which we’ll be reporting on later.
Masawara effectively owns 50% of Dandemutande through a company called Telerix Communications which was created when Dandemutande sold part of the business to the investment company. The rest is owned by a consortium which includes the previous Dandemutande owners. The internet provider is led by Michele Scanlon, who took over as CEO back in 2013.
Dandemutande, as you may know, made a big entrance onto the consumer internet market back in June 2012 with a launch of uMAX, and a year later slashed prices to $75 for 20GB effectively becoming the lowest priced internet in the country. But the competition caught up and rode right past. It’s more than two years and the company’s made no other major service package, technology or pricing changes since. To understand how long that is, consider that TelOne, a government owned internet provider, has introduced 3 major product changes that include Fibre to the Home (plus rebranding) in less than 2 months.
Such financial results are why we dismiss the suggestion that Masawara would want more of this telecoms business.