The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas is currently excluded from 55 per cent of the Bahamian communications market, a senior executive arguing it should be “in top spot” to gain the second cellular licence.

The BISX-listed communications provider’s presentation last week to potential investors in its $100 million preference share issue, which launches today, made clear why it has decided to expand northwards via $100 million worth of acquisitions.

BTC’s cellular monopoly, which expired on April 7, has meant that Cable Bahamas was excluded from 55 per cent of the $435 million Bahamian communications market, the latter’s presentation argued.

Noting that it was “currently competing in 45 per cent of the total market”, split 26/19 in its favour with BTC enjoying the remainder, Cable Bahamas effectively admitted it is ‘hedging its bets’ on whether it will win the bidding for the second cellular licence.

The Government has yet to publicly announce how the bid process for this licence will be conducted, and many communications observers have linked the publication of the revised Communications Sector Policy - now over a year late - to the timing of a decision on this issue.

Cable Bahamas’s presentation to the institutions and high net worths it is targeting for today’s private placement (the public need not apply) suggested, though, that cellular competition to BTC may not truly arrive until the 2017 first quarter - almost three years away.

Cable Bahamas is estimating that it will take 18 months to award the second cellular licence, and another 15 months for the chosen bidder to build out and get its network infrastructure ready.

Barry Williams, Cable Bahamas’ senior vice-president of finance, confirmed to Tribune Business that the company’s five-year financial projections did not include any potential impact from the award of a cellular licence.

“We’ve made no secret about it,” he said of Cable Bahamas’s desire to bid for the licence. “We’re a Bahamian company, and think we should be in top spot to get the next cellular licence.

“We’ve got the expertise, we’ve got the network, we’ve got the team. We believe very strongly that we can provide a very competitive product, as demonstrated with all the products we have in this marketplace. We’re hopeful we will be in the consideration.”

Cable Bahamas will likely face stiff competition for the second cellular licence, arguably the most lucrative opportunity to emerge in the Bahamian communications market since its deregulation.

Apart from Digicel, the other contenders will likely included Limitless Mobile, the European-based operator that is acquiring a majority stake in Bahamas-based IP Solutions International, plus the likes of Virgin Mobile and Vodafone.

But, despite having already gained 27 per cent share of the Bahamas’ fixed-line market in just over two years, the Cable Bahamas presentation makes clear the company views this nation as a mature market with “limited population size”.

Cellular remains the last great growth opportunity, and Cable Bahamas acknowledges that its historical growth has come from new product launches. These are likely to be limited and, with the BISX-listed provider describing growth as “an important strategic imperative”, it admitted it was not certain to win a cellular licence.

It summed it up thus: “Continued deregulation will bring growth opportunities, along with competitive risks.”

Caribbean expansion was deemed less feasible, due to the presence of well-established competitors and lack of inter-island connectivity, making Florida the logical choice for Cable Bahamas expansion.

Mr Williams, meanwhile, reviewed to Tribune Business that Cable Bahamas had inherited a 50/50 joint venture with the Albany project’s major investor via its US acquisitions.

Through its acquisition of Orlando-based Summit Broadband, the BISX-listed communications provider has picked up an equity interest in Dais Communications, an entity that serves the Tavistock Group’s Lake Nona development.

The Tavistock Group is the lead investor/partner in Albany, and is the vehicle for Lyford Cay-based billionaire, Joe Lewis’s, worldwide investments.

“It’s a joint venture investment that was acquired,” Mr Williams explained to Tribune Business, “for a community at Lake Nona. We provide all of the infrastructure and services. That area includes resorts, homes, commercial properties and hospitals. It a is a joint venture with the Tavistock Group; its Orlando arm.”

Dais Communications in theory will give Cable Bahamas’ newly-acquired US operations further access to a wealthy, high-yielding customer base. Yet the Bahamian company’s accounts show the joint venture has yet to turn a profit, losing $152,278 in 2013 after incurring $68,980 of red ink in 2012.

Cable Bahamas’ accounts value its 50 per cent equity stake in Dais Communications at $3.85 million, its US interests having injected a further $1.66 million in contributed capital in 2013. Revenues for 2013 stood at $360,873, and expenses at $513,151.

Cable Bahamas’ presentation last week made clear the extent of the growth opportunity it believes Florida presents, contrasting the Bahamas - with an estimated 350,000 population and 105,000 homes - to the US Sunshine state’s 19.5 million persons and 9.03 million homes.

The markets already served by Cable Bahamas’s US operations cover a 3.2 million population, and the presentation indicated there was ample room to grow an existing 8.6 per cent Florida residential communications market share.

And Cable Bahamas also made clear it intends to leverage Summit Broadband’s position as the leading communications provider to central Florida’s resort community, an area that includes Disney World plus high-end hotels and gated communities.

Summit Broadband currently enjoys a 47 per cent share, or 57,000 rooms, of Orlando’s 121,00 hotel-room market. The number of rooms it serves has increased by 32,000, or 128 per cent, in the past 48 months, and includes awards of 1,800 and 450 rooms from the Universal/Loews and Four Seasons brands respectively.

Cable Bahamas’ financial projections to 2018 make clear that while its Bahamian operations will continue to enjoy steady growth, the biggest contributor to the forecast bottom and top line increases will be Florida.

On the revenue front, the Florida operation is forecast to generate just $39.6 million or 25.7 per cent of Cable Bahamas’s projected $154.2 million top-line in 2014.

This, though, is targeted to increase to $82.7 million come 2018 - a 109 per cent increase over five years. And, as a percentage of total revenues, Florida’s share will have grown to more than 39 per cent of the total $20.9.4 million.

It is a similar story at the bottom, with Florida’s projected 2014 net income pegged at just $1.9 million or just 12.4 per cent of Cable Bahamas’s total $15.3 million profit. This number, though, is forecast to increase to $8.3 million by 2018, with Florida accounting for 23.4 per cent of the group’s $35.4 million net income by 2018.

Florida will also account, not surprisingly, for the majority of Cable Bahamas’ annual capital spending going forward. Some $97.4 million will be invested in the ‘Sunshine State’ over the next five years, compared to $75.8 million in the Bahamas, with the greatest spend - $27.9 million - coming this year.

“All of the acquisitions are a real benefit to Cable Bahamas,” Mr Williams told Tribune Business. “From a growth perspective, it’s a big step in the right direction for us.”