The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company’s (BTC) controlling shareholder has demanded that it be placed on a ‘level playing field’ with any cellular rival, as price cuts dropped some margins by up to 21 per cent year-over-year.

Phil Bentley, Cable & Wireless Communications (CWC) chief executive, told a conference call with London-based investment analysts that it had “insisted” to the Government that any new cellular market entrants be required to provide the same ‘universal service’ coverage that BTC offers.

This, he said, would prevent the winner of the second cellular licence from ‘cherry picking’ the most profitable Bahamian islands and ignoring service provision to the rest - something that would give it a competitive advantage over BTC.

The latter, as the former government-owned monopoly and market incumbent, is mandated to provide ‘universal service’ coverage across all Bahamian islands, even though doing so - especially in the sparsely populated southeastern islands - is loss-making in many instances. BTC, and its controlling shareholder, now want their cellular rivals to experience the same pain.

And, with the Christie administration yet to announce the process for awarding that second cellular licence, thereby further extending BTC’s monopoly to the detriment of Bahamian consumers, Mr Bentley extolled: “No news is good news.”

Addressing the prospect of cellular liberalisation, and the arrival of a competitor in the Bahamas, Mr Bentley told analysts: “We still have no news on the rules relating to the award of the second mobile licence.

“From our point of view, no news is good news, but in the meantime we are upgrading our networks and improving networks.

“As you know, it’s a huge archipelago of islands, and we have had service disruptions in different islands.”

While the Government has publicly stated it wants to introduce cellular competition in the Bahamas as soon as possible, having issued such instructions to the Utilities Regulation and Competition Authority (URCA), many observers are waiting to see how long it takes to publish the rules that will govern the bid/auction process.

The Christie administration has appointed a committee led by former Ministry of Finance financial secretary, Ruth Miller, to handle this, but some observers have suggested that any extended delay in releasing these rules will amount to an extension of BTC’s cellular monopoly - and a reward for CWC agreeing to the ‘2 per cent’ BTC Foundation deal.

The losers from any delay in introducing competition will be the Bahamian people, consumers and businesses, and Mr Bentley’s seeming glee at the continued wait will likely fuel suspicions in some quarters.

CWC, meanwhile, has demanded that it be placed on a cellular ‘level playing field’ with the first rival to enter the market.

“One of the things we’ve been asked to do is give our views as to how we think competition should be rolled out; asked by the Government and the Commission in charge of competition,” Mr Bentley said.

“One of the things we’re emphasising is that any new entrant has to offer a full island service, because that’s what we do, and obviously it’s very easy to pick out Nassau and Freeport.

“But we are insisting that any new entrant covers all the islands. In the meantime, we’re looking to offer more value to our customers. You will have seen the ARPU come down a bit. That’s through pricing offers. Again, it’s getting ready for competition there.”

Mr Bentley was speaking on CWC’s results for the three months to end-June 2014, with the figures showing how price cuts to prepare BTC for upcoming cellular competition had further eroded the Bahamian carrier’s margins.

BTC’s average monthly revenue per subscriber (ARPU) for its mobile business dropped by 8.3 per cent year-over-year, falling from $70.7 in June 2013 to $64.8 this year.

However, data released by CWC showed the latter figure was a slight improvement on the $62.8 revenue per mobile subscriber that BTC was earning at its financial year-end on March 31, 2014.

The deepest margin cuts came in BTC’s broadband Internet category, where revenues per subscriber fell by 21.3 per cent year-over-year - from $70.1 at end-June 2013 to $55.2 at the same point this year.

However, the latter figure again represented a slight improvement on the $54.4 revenue per subscriber margin that BTC was earning at end-March 2014.

And the price/margin cuts appear to have aided BTC in expanding its broadband Internet subscribers by 35.3 per cent year-over-year, from 17,000 to 23,000 at the 2014 first quarter end. BTC, though, has some way to go in making inroads into the market-leading share held by Cable Bahamas.

BTC was able to reverse the declining margin/increased subscriber number trend with its fixed-line business. Revenue per subscriber here rose by 3.5 per cent year-over-year, from $37.4 in June 2013 to $38.7.

Yet subscriber numbers were down by 10.4 per cent over the same period, from 115,000 to 103,000 at end-June 2014, although the latter figure was the same as March year-end levels.

Mr Bentley told London-based analysts that BTC’s price cuts were a key factor behind the decline in CWC’s mobile data growth rate from 23 per cent to 9 per cent,

“We did cut prices in the Bahamas, as I mentioned, trying to get ready to add more value to customers, and the Bahamas is our second largest market,” he said.

CWC’s results statement said BTC “delivered solid financial performance alongside improved network reliability” during the three months to end-June 2014.

That is far more upbeat than recent comments by BTC’s newly-appointed chief executive Leon Williams, who has said the privatised carrier is nowhere near ready for cellular competition.

For the year to end-March 2014, BTC accounted for almost 43 per cent of CWC’s total Caribbean EBITDA (earnings before interest, taxation, depreciation and amortisation).

BTC’s own EBITDA rose 7 per cent year-over-year to $128 million, largely on the back of lower operating costs. CWC’s Caribbean EBITDA jumped 8 per cent to $298 million.