The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company’s (BTC) controlling shareholder yesterday blamed its “flat” first-half financial performance on preparations for cellular competition, with net income matching last year’s $37 million.

The Bahamian carrier’s financial performance, detailed in Cable & Wireless Communications (CWC) results for the six-months to end-September 2014, reveal that BTC is finding growth hard to come by amid continued cost-cutting.

BTC’s total revenues fell by 2 per cent year-over-year, from $175 million in 2013 to $171 million this time around, a development CWC blamed on cellular price reductions as it prepares for its Bahamian monopoly to end.

BTC’s cellular revenues for the six months to end-September 2014 also fell by 2 per cent, from $129 million to $126 million, with fixed-line voice off by 4 per cent - from $25 million to $24 million.

The only area where BTC enjoyed top-line growth during its financial year first half was in broadband Internet, where revenues jumped 14 per cent - from $7 million in 2013 to $8 million this year.

With BTC’s managed services revenues off by 7 per cent, from $14 million last year to $13 million, its figures again emphasised just how reliant it is on its cellular monopoly for the bulk of its revenues and profits (see other article on Page 1B).

“Mobile revenue was down $3 million following price reductions ahead of the anticipated entrant of a mobile competitor, reflected in an 8 per cent drop in ARPU (average revenue per subscriber),” CWC said.

“Subscribers did, however, grow 2 per cent following additional investment in 4G, the introduction of LTE services last year driving growth of 34 per cent in mobile traffic in the six month period.”

On its other business segments, CWC added of BTC: “Broadband revenue was up 14 per cent, with subscribers growing 32 per cent following increased uptake in fibre-based products, as consumers benefited from investments to double broadband speeds to more than 16 Megabits per second in the prior year.

“Fixed voice revenue at $24 million declined by 4 per cent, as subscribers fell by 11 per cent due to substitution from fixed to mobile.

“Despite this reduction in customer numbers, ARPU grew 11 per cent as there was upselling of higher tariff products as part of bundled offers. Of the subscriber base, 19 per cent of customers (12,000) have upgraded from their basic packages.”

With its total cost of sales rising 6 per cent from $31 million to $33 million, BTC’s gross margin dropped 4 per cent year-over-year - from $144 million to $133 million.

However, BTC managed to maintain par with last year’s net income performance thanks largely to ongoing cost reduction programmes that dropped operating expenses by 6 per cent, from $84 million to $79 million.

Seemingly little-noticed on the outside, BTC has continued to reduce its workforce, with staffing levels reduced by 37 or 5 per cent year-over-year for the first half. The carrier’s employee numbers fell from 822 to 785.

The figures also highlight why BTC and its controlling shareholder, CWC, are so eager to launch Internet Protocol (IP) TV in the Bahamas by 2015 and become a ‘quad play’ provider, challenging Cable Bahamas’ long-standing dominance in that market.

This is because BTC is finding growth in its three existing markets hard to come by, and with its lucrative cellular monopoly set to expire shortly, the carrier could potentially face financial headwinds if the new competitor seizes substantial market share.

BTC to-date has only been able to maintain profit levels by cutting costs, and eventually a limit is reached as to how much ‘fat’ can be trimmed.

The company’s earnings before interest, taxation and depreciation (EBITDA) fell slightly during the six months to end-October, dropping from $60 million to $59 million.

However, a reduction in depreciation and amortisation enabled it to deliver flat year-over-year net income of $37 million. Operating cash flow, though, was lower by 14 per cent, standing at $32 million compared to $37 million the year before.

BTC said gross margins dropped by one percentage point, due to reduced revenues and “higher subscriber acquisition costs”. Cellular subscribers account for 47 per cent of BTC’s customer base.

EBITDA margins, though, were up one percentage point at 35 per cent, due to the 6 per cent drop in operating costs and staffing reductions.

When it came to subscriber numbers, BTC’s mobile customers were up year-over-year from 305,000 to 311,000. The company enjoyed most success on broadband, where subscriber numbers were ahead some 6,000 - jumping from 19,000 to 25,000.

Fixed-line subscribers were down from 114,000 to 102,000, with average revenue per subscriber under pressure in all segments apart from fixed-line.

Revenue per mobile subscriber stood at $62.4 compared to $67.8 at September 30, 2013, while revenue per broadband client was $52.5 compared to $67.7.

Only fixed-line was up, standing at $39.5 per customer compared to $35.7 in 2013.