KeyTech Ltd’s profits fell to $5.9 million for the fiscal year 2010/11, as early retirement and redundancy expenses cost the telecommunications group $4.4 million.The profit fell from $6.3 million a year earlier, as the company’s CEO Sheila Lines reported a “substantial drop in demand for residential services due to lower levels of economic activity and population”.Ms Lines also called for Government to reconsider its plans to levy significant extra fees on the industry to fund regulatory reform, and warned that the extra expense at a time of falling revenue would likely cause job losses and a decrease in investment.“We anticipated these conditions would continue from the prior year and we have continued to adjust our business model to reduce costs and focus on core products that have strong margin and future viability, specifically in the area of data services,” Ms Lines said in a statement released yesterday.Net earnings with early retirement and staff separation costs excluded were $10.3 million compared to $9.2 million in the previous year.Total revenues for 2010/11 decreased $9 million to $98 million, as all revenue lines except data services fell in Bermuda. In the Cayman Islands total revenue was similar to the prior year with increases in corporate revenue offsetting residential revenue decline.Total expenses declined $6.1 million to $94.7 million. Excluding the impact of early retirement and staff separation costs in both years, total expenses declined $9.7 million year over year.KeyTech, owner of the Bermuda Telephone Company, Logic Communications and Logic-Cayman, executed the merger of its M3 Wireless unit with CellularOne to form CellOne in May, after the end of the financial year.“The shareholders of CellularOne and we recognised that we could be in a more competitive position and deliver greater value for our customers as a combined business,” Ms Lines said.Total capital asset expenditure in the current year was $14.1 million compared to $11.3 million in the prior year. Significant individual capital items in the year were $5.5 million on network and premises in BTC to improve service and maintain existing assets, $3.8 million in M3 Wireless on additional cellular sites to increase network coverage and capacity and $2 million on construction of fibre plant in the business district of George Town in the Cayman Islands.“The structural changes to the group, merging in wireless and acquiring 100 percent of Logic-Cayman, enable us to focus on future opportunities for our group,” Ms Lines said.“Our fibre network investments in the current year and those planned for 2010/11 deploy our available capital in the areas of our group with the most attractive competitive position as future demand for service as bandwidth use continues to grow.”Total cash dividends paid to shareholders for the year were 48 cents per common share. At the end of the year, net assets per common share were $9.64, compared to $9.80 in the prior year.Ms Lines expressed concerns about Government’s plans for telecommunications reform.In May 2010 it was proposed that the new regulator will charge additional fees to cover its newly formed administration costs, of up to three percent of revenues.KeyTech said its current effective corporate tax rate to the Bermuda Government for the combination of telecommunications licence, spectrum fees and employers’ payroll tax is 36 percent of net income before taxes, totalling millions of dollars. This does not include the duty paid to Government on import of network equipment.“If there is no reduction in the existing telecommunication fees contributed to the Government Consolidated Fund, our combined effective tax rate would on that basis increase to 53 percent of net income before taxes,” the KeyTech statement added.“We agree that change to the current system, which dates from 1986, is warranted,” Ms Lines said.“We are very concerned, however, about the breadth of regulation that was proposed in 2010 and the additional costs (in time and money) that the industry will incur and whether they are required for a market the size of Bermuda.“Our market has decreased in size of revenue and new costs at this time will be a heavy additional burden to absorb when facing ongoing downward revenue pressure and will most likely fall on jobs in our industry and reduced capital investment.“We are cautiously hopeful that the Government has taken into account the concerns of the industry on the issue of additional taxation costs due to regulatory reform, however we have not yet seen further drafts of the proposed legislation.”KeyTech said investment income was $9,695 and realised gain on investments was $7,614 for the year.