MNF net profit up 25 percent to AU$9m

VoIP provider MNF has announced net profit of AU$9 million on revenue of AU$161.2 million and EBITDA of AU$17.8 million, rising across all three despite customer losses due to NBN migration.

Australian retail and wholesale voice-over-IP (VoIP) provider MNF has announced its financial results for the 2015-16 financial year, reporting a net profit of AU$9 million, up 25 percent from the AU$7.2 million reported in June 2015.

MNF, which also provides telecommunications software, saw earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$17.8 million, up 46 percent year on year from FY15's AU$12.2 million, on revenue of AU$161.2 million, up 88 percent from AU$85.7 million.

Cash and cash equivalents stood at AU$52.9 million as of June 30, up from AU$6.287 million, while net cash flow was AU$51.824 million, up from AU$9.546 million.

MNF now operates in three segments: Australian domestic retail; Australian and New Zealand domestic wholesale; and global wholesale.

A breakdown of revenue by business saw domestic retail contribute AU$28.917 million, down 1.2 percent from AU$29.253; domestic wholesale add AU$30 million, up 37.7 percent from AU$21.801 million; and global wholesale contribute AU$110.275 million, up 211.2 percent from AU$35.431 million last year.

MNF's total domestic retail residential subscriber base is now 109,000, with its DSL base declining to 13,504 services in operation (SIO) and its VoIP base declining to 91,369 SIO due to migration of customers to the National Broadband Network (NBN).

Its domestic retail small business voice services declined to 8,466 SIO, Virtual PBX and SIP trunk products in service grew by 11 percent to 3,245 SIO; and its business data services decreased to 2,017 SIO.

"Our strong overall performance this year is a result of solid contributions from all three segments of the business: Domestic retail, domestic wholesale, and global wholesale. Organic growth played a key role in this result, with domestic wholesale leading the growth with its gross profit contribution up a very solid 50 percent on last year," said MNF Group CEO Rene Sugo.

"The TNZI acquisition integration is progressing very well, with the new global wholesale segment already performing above expectation, and showing excellent prospects going into FY17."

The strong EBITDA growth was partially due to 12 months of EBITDA contribution recognised from the Telecom New Zealand International (TNZI) business thanks to interim transition arrangements for the acquisition. MNF in June announced the completion of its purchase of TNZI after receiving approvals from the United States government.

"The integration of the TNZI acquisition is progressing well, with all major project milestones for the year having been achieved," MNF said in its financial results presentation.

"These include staff integration, Wellington office relocation, IT systems separation, customer and supplier novation, and US licensing and transaction completion. The global network expansion and upgrade program is well under way."

MNF said it expanded its London point of presence earlier this year, completed upgrading the Los Angeles point of presence last month, and concluded the first stage of construction on the Hong Kong point of presence so it will be "operational soon".

MNF paid AU$22 million in April 2015 to purchase the TNZI global wholesale voice business, which operates throughout Europe, North America, Asia, and Oceania.

TNZI, which has forecast EBITDA of between NZ$3 million and NZ$4 million each year, sells voice, data, mobile, and digital services in six counties, and last year reported carrying more than 2.8 billion voice minutes.

In March, MNF announced that it would also be constructing a nationwide voice network in New Zealand through its IP voice communications provider Symbio Networks, which it will wholesale to service operators and over-the-top (OTT) providers.

MNF said it identified a gap in the market left by New Zealand's bigger telcos, which are choosing to occupy themselves with growing their own retail networks rather than developing the wholesale layer to lease off to the many low-cost OTT operators that are entering the market.

MNF in February reported its financial results for the first half of FY16, announcing net profit of AU$4 million on revenue of AU$83.98 million and EBITDA of AU$8.2 million.

Its profit was up by 29 percent year on year, while revenue jumped by 177 percent and EBITDA by 64 percent. MNF attributed its growth to the contribution of TNZI to the business.