The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas yesterday confirmed its inability to go head-to-head on cellular services with the Bahamas Telecommunications Company (BTC) influenced the $100 million Florida expansion, the final acquisition for which closed yesterday.

Anthony Butler, the BISX-listed operator’s chief executive, told Tribune Business that it began looking further afield for growth opportunities after realising it would “not be in that full competitive situation in the Bahamas by 2014”.

Cable Bahamas confirmed the $53.427 million closing of its fourth and final Florida acquisition, Summit Broadband, for which it had to re-jig the financing plans.

It had originally planned to finance the purchase of Orlando-based Summit via a mixture of $28.255 million in cash (via its existing bank credit lines) and two preference share issues, one raising $13.3 million and the other around $7.8 million.

However, Cable Bahamas was forced to abandon plans to issue the $7.8 million Series 6 preference shares, which would have been given to 31 existing shareholders in Summit Broadband, after it realised Central Bank of the Bahamas’ exchange control approval would not be forthcoming in time to match its completion deadlines.

While the issuance of the 13,310 Series 7 preference shares went ahead, Cable Bahamas was forced to replace the Series 6 with a combination of $6.031 million in promissory notes and an extra $1.8 million in cash from its credit facilities.

It added that the four holders of the promissory notes are former shareholders in Summit Broadband, and include Bahamian entities.

It has taken Cable Bahamas 16 months to complete its four purchases, which also include the $24.162 million deal for US Metropolitan Telecom; $10.1 million for Marco Island Cable; and $12.6 million for NuVu.

“We’re all finished,” Mr Butler told Tribune Business. “We’re very happy to get the protracted closing behind us, and we fully intend to take full advantage of the opportunities that are going to avail themselves in the new territories.”

Cable Bahamas has effectively created a ‘mirror image’ of itself in south and central Florida, replicating its fully-integrated Bahamian communications provider model by bringing together cable and Internet companies, plus a fibre optic infrastructure provider.

“We’re moving ahead with the immediate synergies we have in the Florida entities,” Mr Butler added. “That’s the first focus - jumping to take advantage of the synergies we have in Florida.”

Confirming that Summit’s Orlando base would be the headquarters for Cable Bahamas’ US business, with a satellite office in Bonita Springs, Mr Butler said the company’s business stretched all the way from the south-west and up the Gulf Coast to central Florida.

Turning to the Bahamas, Mr Butler effectively confirmed that Cable Bahamas’ had ‘hedged its bets’ as to whether BTC’s cellular monopoly would be liberalised, and if it would get a rival licence, by expanding to Florida.

Suggesting that Cable Bahamas had realised liberalisation of the market’s biggest opportunity was not going to occur in line with its growth timetable, Mr Butler told Tribune Business: “We’ll continue to explore all the opportunities that come our way in the local market here.

“Currently, we don’t have access to cellular, while our main competitor [BTC] has access to cellular and all the services we offer, video on demand and TV.

“We look forward to the day when we can compete against our main rival in all areas, and Florida is only going to enhance our ability to compete,” the Cable Bahamas chief executive added.

“We could see we would not be in that full competitive situation by 2014 at least, so therefore the company had to make a proper decision for the benefit of our shareholders.”

Mr Butler told Tribune Business that the four Florida companies had “overperformed in the last 12 months”, and this would stand to further benefit Bahamian shareholders.

“We stand behind the [financial] projections we gave at the Extraordinary General Meeting, and look forward to bringing all this to fruition,” he said.

Cable Bahamas has trumpeted the fact that it will now be able to reach one million homes and customers in Florida, and the Summit deal adds another 150 staff. It is now pushing to conclude business contracts and expansion opportunities in early 2014.

“These acquisitions will have an immediate positive impact on digital, broadband and telephony subscriber results. The region where US Metro, MIC, Nu Vu and Summit operate has a population in excess of 11.5 million,” Cable Bahamas said in documents released for its upcoming annual general meeting (AGM).

“Average household expenditures are in excess of $50,000, and the median household income exceeds $45,000. As these indicators suggest, the growing and thriving economy of this region is well positioned for significant growth for years to come.

“The strategic positioning of Cable Bahamas in the heart of this region will allow it to take advantage of both the existing economy as well as future growth potential.”

Tribune Business previously revealed that Cable Bahamas is predicting its US acquisitions will triple annual revenue and operating income growth rates beyond what it would achieve if its activities remain confined to this nation.

The BISX-listed communications provider, in the proxy form issued to shareholders, forecasts that the acquisitions will see it achieve compound annual growth rates for revenue and EBITDA (operating income) of 9.6 per cent and 11.8 per cent, respectively, for the five years to end-2017.

This compared to revenue and earnings before interest, taxation, depreciation and amortisation (EBITDA) growth forecasts of 2.3 per cent and 4 per cent, respectively, if Cable Bahamas’ remained a Bahamian-centric company as it is now.

Outlining the rationale for its bid to acquire Summit Broadband, Marco Island Cable/Nu Vu and US Metropolitan Telecom, the Cable Bahamas’ proxy projected that by 2017, its Florida interests would account for 31.7 per cent of total EBITDA.

This would equate to $20.5 million, out of Cable Bahamas; total operating income of $64.6 million - a major leap from the $44.1 million the company is projected to earn if it remains 100 per cent concentrated in the Bahamas.

In similar fashion, Cable Bahamas is projecting that its US purchases - if finally consummated - will generate 40.8 per cent of company-wide revenue in 2017.

At that point, the BISX-listed communications provider is forecasting that $86.7 million in revenues will come from Florida, taking the total to $212.6 million - as opposed to the $125.9 million that would be generated if it remained focused solely on the Bahamas.