Sonatel's margins pressured by rivals, tax

Senegalese telecom operator Sonatel saw 2010 net profits slip as tougher competition nibbled at its margins and it was hit by a temporary tax surcharge on incoming traffic, the group said.

Our markets remain marked by tougher competition, it said in a statement. The macroeconomic outlook is good for 2011 with higher GDP growth than in 2010 seen in all our countries.

However it added: Fiscal and regulatory pressure is becoming a major concern.

Sonatel's turnover rose 6.5 percent to 599.00 billion CFA francs as it expanded its business in Senegal, Mali, Guinea and Guinea-Bissau, with mobile subscribers topping the five-million mark for the first time in home market Senegal.

But net profit fell to 184.76 billion from 185.03 billion in 2009 and its margin on earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to 54.1 percent from 56.2 percent over the same period.

Between June and November Sonatel was hit by a surcharge on incoming international calls as Senegal sought to monitor telecom traffic and boost public finances.

The measure was suspended after unions shut down long-distance and Internet services to protest against a move they feared would cost jobs.

Sonatel, part-owned by France Telecom, has total market share of 60 percent in Senegal and 69 percent in Mali.

Analysts have long admired Sonatel's healthy operating margins but saw them vulnerable to competition from other players, notably in Senegal from Millicom International Cellular's Tigo unit and Sudan's Sudatel.

Sudatel already served notice in June it was out to double its modest five percent share of the Senegalese market with new services and price cuts by its Expresso unit.

The Sonatel statement gave no breakdown of market share.

Sonatel shares are quoted on the Ivory Coast-based West African BRVM bourse, which suspended activity earlier this month due to security fears after a disputed November 28 poll triggered a violent battle for power. They last traded at 160,000 CFA.

Analyst Ivan Kim of Moscow-based Renaissance Capital noted that Sonatel, which proposed a 12,600 CFA per share net dividend, remained a strong dividend play but added: Given the political instability in Ivory Coast and the North African region, the political risks should not be underestimated.

The BRVM bourse has transferred its offices and staff to Bamako, Mali and is expected to restart business soon.