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STARCOMMS OPERATING PROFIT RISES BY 53 PER CENT

By NBF NEWS
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Starcomms Plc, a telecommunications company quoted on the Nigerian Stock Exchange has announced an improved performance in its service revenue in the 2009 financial year.

The result indicated that gross profit rose from N12.38bn in 2008 to N18.89bn in 2009, indicating an increase of 53 per cent, while cash flows from operations increased to N7.80bn in 2009 compared to N7.14bn in 2008.

Report of its financial results for the year ended December 31, 2009 showed that growth in service revenues rose by 13 per cent, due to the strong growth recorded across voice and data, coupled with the company's continued focus on core operations.

The service revenue is the measure of the true performance of a telecom operator.

A statement from the company on Tuesday said, its active subscriber base increased from 2,085 million in 2008 to 2,629 million in 2009, thereby achieving a growth rate of 26 per cent compared to the previous year, despite the subsidy on handsets by other operators, which showed that Starcomms has taken the lead in attempting to introduce some sanity into the CDMA market.

According to the Chief Executive Officer, Mr. Maher Qubain, the earnings before interest, taxes, depreciation and amortisation, increased by 700 per cent from N935m in the previous year to N7.33bn due to the service revenue growth, operational efficiencies from greater scale of operations and good cost control.

The result also revealed that the increase in its geographical coverage to 31 cities and 22 states paid off, but net interest expense increased to N2.06bn in 2009 from N326m in 2008.

To reduce exchange rate exposure, the financial result indicated that Starcomms converted US$60m of foreign debt into naira, which increased interest charges.

Loss after taxation was N7.787bn, of which N4.951bn resulted from unrealised foreign exchange losses on remaining dollar denominated debt.

The company explained that any appreciation of the Naira will, however result in these unrealised losses being written back as profit in the coming year.

Qubain in his evaluation of the result said that 'Starcomms performed well during 2009, despite the challenging economic conditions and the irrational level of handset subsidisation by certain CDMA operators'.

He added that 'the fundamentals of the business are strong and the company is benefiting from the greater scale of efficiencies. However, as is common with all operators who are in a strong growth phase and are investing considerable capital in building out their network, our interest charges were high, coupled with high depreciation charges. '

He explained that 'the standard model is that operators see strong growth in the Profit Before Tax level once the business begins to mature and operating profits outstrip interest and depreciation charges. To this end, Starcomms is exploring ways of improving its capital efficiency and strengthening its balance sheet during 2010.'