Cost cutting and cost control measures are on the top of Maltacom's agenda this year, Maltacom chairman Sonny Portelli told The Sunday Times last week.
The new measures the company has introduced have had an "excellent effect" on the first quarter of the year, both in its administrative overheads and operating overheads.
Maltacom has no plans to shed staff, except through natural wastage. "The workforce is deployed efficiently," Mr Portelli said, adding: "There is no thought to introduce early retirement measures. We are looking for economies from other areas of the operation: cutting expenses in the way we use our resources; transportation; fuel; and wherever there are outgoings."
Looking at the published results, ahead of the next annual general meeting, Mr Portelli said turnover was well within sight of last year's: Lm54.7 million, compared to Lm55.1 million in 2003. However, despite this small drop in revenue, the operating profit was slightly higher at Lm13.2 million (Lm11.3 million).
"There is definitely no alarming drop in profits: our profits before tax in 2003 were Lm20.6 million; this amount included the handsome profit we made from the disposal of our shares in Vodafone.
"However, this was a one-time event. In fact, shareholders received a special dividend, specifically on account of this disposal. In 2004 we did not have a similar exceptional item, and consequently our profits of Lm12 million for the year reflect our normal activities and compare very well with the results of the previous year before the exceptional item.
"Generally speaking 2004 was a better year for normal operations than 2003. Go Mobile and other new wave industries, such as broadband and the Internet, made a positive contribution to our bottom line."
Go Mobile's contribution was particularly significant, with a profit of more than Lm4 million before taxes. "In just four years this company has become one of the cornerstones of our Group," Mr Portelli said. "Datastream, our broadband supplier, made a profit of more than Lm1 million before tax. These results have compensated, in a significant way, for the reductions registered in our traditional lines of business."
Other measures that were introduced in 2004, and will continue in 2005, are meant to ensure that Maltacom gets paid for its services on time. "These measures have proved an excellent tool in the hands of our management: debtors' balances have been reduced from Lm32 million in 2003 to Lm24 million in 2004. This is an extra Lm8 million available for investment," he said.
Available cashflow from operations went up from Lm17.4 million at the end of 2003 to Lm21.2 million at the end of last year. "In 2004 we also cut down our debts with our bankers by over Lm2 million and at December 31, 2004, these stood at Lm5.6 million. I think that the company's gearing is in very good shape."
Asked about the current share price weakness Mr Portelli said: "Considering the performance of our sector internationally, I think that Maltacom is in good health and its performance is as well as that of any other telecom company, and in quite a few cases better. So really I cannot come to a logical explanation for the recent movement in the share price.
"We are reasonably optimistic that the trends that were visible in 2004 will continue and of consolidating our performance during the current year. I am happy with the results of the first quarter; we are on the right track."
Privatisation is out of Maltacom's hands, with the Privatisation Unit responsible for selling Government's shareholding in the company.
Government has spoken quite clearly in public that it would not sell its shares to whoever, he pointed out. "The plan is for a strategic investor, who ideally is already a player enjoying a high profile in the telecoms world, to acquire the shareholding.
"We have an agreement with the Government on how information is to be divulged to protect the interests of minority shareholders and the business interests of the company itself," Mr Portelli added.
Turning to the regulatory environment, Mr Portelli said Malta's accession to the European Union and the general business environment had brought about a new regulatory framework, which was facilitating competition, doing away with the monopolies of the past and creating a totally new landscape in which Maltacom had to exist.
"The traditional monopolies across Europe and the United States have gone. Monopolies were wrong. They stifled competition and stood in the way of progress.
"The consumer is ultimately the winner - as it should be. I believe we can exist profitably and deliver both to the clients and shareholders what they expect from us.
"However - a word of caution - we must not go to the other extreme where we expect to change the whole environment overnight."
Regulations were welcome but the company must be given enough time to adapt to the new environment. "Maltacom should not be faced with the implementation of an inordinate amount of regulation in a very short time.
"I repeat: I welcome change. However, change must be introduced in an orderly manner; otherwise it becomes disruption.
"Number portability is part and parcel of regulation, and I do not mind telling you that I consider its usefulness extremely questionable. It is very costly to implement and will not add anything of value to our customers.
"In a microstate like Malta, considering the capital costs and its ongoing effect on revenues, the utility of number portability is simply going to increase our overheads, because, at least up to now, there is no business case for it at all."
Mr Portelli is confident that Maltacom can cope with new interconnection measures, making it easier for its competitors to gain access to its network and compete. "This new landscape will certainly be very challenging. However, we are confident that we will retain our market share. It will be an interesting fight, but we have a large war chest! Our customers can look forward to interesting and enjoyable times. However, I do not know how our competitors will see it."
Two examples of Maltacom Group investments are the contract to upgrade all the company's telephone exchanges, at a cost of €6.3 million - one of the biggest operations Maltacom has ever undertaken; and Go Mobile's migration to 3G telephony.
"These two initiatives represent an investment of many millions of liri. However, it is already all provided for, and we are not looking for any special favours from anyone to introduce it."
Maltacom will complete the project in 18 months. "The work has been very well planned. It is under way and, thanks to the hard work of our people and those of the supplier during the planning stages, we will be saving substantial sums because large sections of our existing infrastructure will be redeployed to the new project."
When this initiative is finally implemented Maltacom will be among the European leaders in the field. "We will have cutting-edge technology that will allow us to provide exciting new services and resiliences that were not possible with our existing infrastructure.
"As for Go Mobile, the resources are in place and we are all waiting the outcome of our licence application." Mr Portelli said the licence applications have been filed and the deadline for new applications had closed.
"It looks like we have an excellent chance of getting a licence. There will now be three providers of this new service, so here again competition will be intense. However Go Mobile has an excellent track record when it comes to fighting for market share."
Asked about voice over Internet protocol, he said: "VOIP is the future. It is here to stay. We have no problems with VOIP. We are in and will be increasingly active as a VOIP provider."
On the convergence of traditional telephony to mobile phones, he said he did not think this would happen tomorrow. "The technology is moving in that direction and we will definitely conform to this reality. However, it is going to take some time."
Asked how he looks at the future of Maltacom, Mr Portelli was upbeat: "I am very optimistic about this company's future. I am convinced it still represents an excellent investment for our shareholders and, with the right strategic partner in place, all our shareholders, our stakeholders and our clients can look forward to some really exciting times ahead."