The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas yesterday said the $587,000 net loss suffered in the 2015 third quarter was unlikely to develop into a trend, as it blamed the ‘red ink’ on unanticipated delays in the mobile licence bidding process.

Barry Williams, its senior vice-president of finance, told Tribune Business that if the accrued dividends from the $75 million preference share offering in May were “pulled out” then the company would “not see that loss” for the three months to end-September.

He explained that Cable Bahamas had a “two-fold” purpose for raising that capital - financing its continued Florida expansion via its Summit Broadband vehicle, and also putting it in position to rapidly build-out mobile infrastructure should it win the licence.

While the BISX-listed communications provider has been selected as the ‘preferred bidder’, Mr Williams said the process had taken longer than Cable Bahamas had anticipated.

As a result, the proportion of the $75 million allocated to mobile financing was still on Cable Bahamas’ books and had not flowed through into true investment, and the preference share dividends were accumulating - or accruing - on its balance sheet.

Cable Bahamas’ dividends payable jumped more than three-fold compared to the 2014 year-end position, rising from $1.886 million to $6.436 million.

Preference share dividends on the income statement also increased by 29.9 per cent, from $1.785 million to $2.318 million.

“Once we’re through all that needs to be done, that impact on the results won’t be there,” Mr Williams told Tribune Business.

“You don’t typically raise funds for no purpose at all, and with no returns coming behind. We’ve had some delays in terms of we received that issue, the issuance of those shares. It could have been invested if we were through the process.

“If we would have flowed the funds through, it would have bene something that mitigated the accrual of dividends on those shares,” he explained.

“We were preparing ourselves in terms of funding so we could hit the ground running when it was complete, and be in a position to move quickly when we got through the process.

“We don’t have to wait for start-up funding; we are going to have it from day one, and what happens from there on will be decided.”

Cable Bahamas’ year-over-year $3.136 million reversal ‘into the red’ for the three months to end-September 2015 was also driven by hikes in operating expenses and depreciation and amortisation.

The former rose by 17.7 per cent, from $23.759 million to $27.97 million, while depreciation and amortisation was up by 24.8 per cent - from $8.068 million to $10.069 million year-over-year.

Mr Williams attributed the increases to Cable Bahamas’ strategy of ‘spending to accumulate’, with its capital investments in its Florida business incurring additional costs and depreciation today for the benefit of greater returns and profits tomorrow.

“What you find in telecommunications is that when you have large capital expenditures in one year, in ensuing years when that capital spend decreases you will see depreciation increasing,” Mr Williams told Tribune Business.

Operating expenses, he added, also typically increased as a carrier added subscribers and revenues - just as Cable Bahamas is doing now, with revenues and earnings lagging behind.

“Our investment is not a short-term investment, so the benefits lag the costs,” Mr Williams told Tribune Business. “We have pretty significant capital costs up front, and operating costs up front, and the revenues lag behind the expenditure increases.”

Cable Bahamas’ third quarter revenues rose by 9 per cent from $37.457 million to $40.905 million, a rate that was almost half the equivalent for operating expenses.