The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) needs to “reduce operating costs by another 20 per cent” before cellular phone services are liberalised, its chief executive yesterday saying its post-privatisation transformation had reached “the halfway mark”.

While acknowledging that “much progress” had been made since Cable & Wireless Communications (CWC) acquired a majority 51 per cent stake in BTC, Geoff Houston said the company was targeting end-2013 to complete its transition to a customer-focused operation.

Disclosing to Tribune Business that BTC was “performing strongly”, and was “on target” to deliver its owner’s forecast of $85-$100 million in annual EBITDA, Mr Houston said some $100 million worth of capital investment had been ploughed into the company over the past two years.

Noting that capital investment for its upcoming 2013-2014 financial year was set to be maintained in the $45-$50 million range, the same levels as the current year, Mr Houston said BTC was looking to this month to complete “deployment” of its 4G (fourth generation) network (see other story on Page 1B).

He added that BTC was also starting to transition some 127,000 fixed and broadband lines to its Next Generation Network (NGN), a project targeted for completion by end-summer 2013.

And Mr Houston also disclosed that BTC was making an initial $8-$10 million investment in establishing its Long Term Evolution (LTE) network, bringing the fastest mobile and data speeds available, with its roll-out set to begin in 2013.

Outlining BTC’s expected transition from a voice (mobile and cellular) business model to one that was predominantly data-driven, he added that it was also hoping to complete trials of its proposed cable TV product by end-March 2013.

“I still believe we have made a lot more progress than originally anticipated,” Mr Houston told Tribune Business.

“There’s only so much you can find out with due diligence exercises. As you get further into the projects, more into the business, you find there’s more things you need to fix that you thought you did not need to.

“We still get odd surprises now and then, but I’m inspired by how quickly we get on those challenges and fix them as one team - BTC and LIME.”

Agreeing that there was further room for cost and efficiency improvements, Mr Houston said reductions in the former category would largely come from non-staff areas, given that BTC had reduced its workforce via 470 persons through the Voluntary Separation Package (VSEP) scheme.

“We’ve probably reduced our operating costs by somewhere around 20-25 per cent,” Mr Houston said of BTC’s progress to-date.

“I believe that to be really ready for competition we need to reduce operating costs by another 20 per cent, and the majority of those opportunities are non-staff related.”

And he added: “The NGN will make us a significantly more efficient organisation, and allow us to switch off legacy networks once we move to deliver voice and data. We’ve got more to do to become a much more cost-conscious organisation.”

On the capital investment side, Mr Houston said BTC had been able to leverage the scale of its owner, CWC, and regional affiliate, LIME, to obtain cost savings through purchasing power.

“If you look at the new mobile network, it was bought 35-40 per cent cheaper than BTC could have done alone,” he told Tribune Business.

Apart from the ability to obtain better terms, prices and discounts from equipment and technology suppliers, an ability BTC lacked as a relatively small standalone, Mr Houston said being part of the CWC/LIME network also ensured it got “a better response” from vendors such as Ericsson.

“We’re able to get the best people we can from our suppliers as well,” he explained. “We can leverage buying power.”

Describing the capital spend and investment in BTC’s LTE technology and network as a moving target, Mr Houston said: “I think the initial investment will be getting close to $8-$10 million.

“Having said that, customer demand may take us in a different direction again.”

Pointing out that the Bahamas had obtained 4G network technology ahead of major markets such as the UK, which had only just launched it in 10 major cities, Mr Houston said LTE would not be widely available in Europe for a long time.

“Our benchmark is North America, and we’re trying to keep up with LTE there,” he added. “The handsets need to be more widely available, but when they do that, we will see a significant increase in demand for LTE.

“We’ve placed the order with our supplier, and expect LTE equipment to arrive in December.”

Serving further notice of BTC’s intention to go ‘head-to-head’ with Cable Bahamas in all aspects of the Bahamian communications market, following the 2009 expiration of the latter’s 15-year exclusivity, Mr Houston said the newly-privatised carrier would move to aggressively roll-out its own cable TV product in 2013.

LIME had already launched such a service in Barbados, and Mr Houston said BTC would seek to leverage the programming and equipment supplier contracts and relationships already in place for the Bahamas.

“I’m hoping we can get a trial in place before the end of March, and have a quick roll-out across the network next year,” he told Tribune Business.

“I’m fairly confident we will be able to get some good market share. We’ve got a network that has much broader reach than anyone else, which allows us to reach areas the competitors can’t. When we go head-to-head we believe we’ll be very competitive and win back market share.”

Noting that BTC’s 8 Megabyte (MB) broadband service was competitively priced at $40 per month, Mr Houston added: “Our first two years of operating the business, from a capital point of view, have seen an investment of about $100 million, and we expect to maintain a fairly high level of capital investment going into next year.”

BTC’s capital investment levels for 2013-2014 were projected to be $45-$50 million, in line with that for its current financial year.

Emphasising that this was not ‘set in stone’, Mr Houston said BTC would invest in its infrastructure as and when necessary. He explained that the company had to “build ahead of customer demand”, something that, for example, would require further 4G network upgrades.

And, preparing for BTC’s evolution, Mr Houston told Tribune Business: “At a point in the future, mobile data will be bigger than mobile voice, so in the future the majority of revenues will be coming from the data spectrum.

“I would imagine that within five years we would be a mobile data business.”

Customers were driving this transition at a pace faster than the communications industry could keep up with, Mr Houston added, emphasising the urgency of completing BTC’s post-privatisation transformation given this and the impending cellular liberalisation in 2014-2016.

Noting that the “biggest challenge” was transforming BTC’s internal culture into one with a”much more customer focused mindset”, he told Tribune Business: “We’re probably at the half-way mark in terms of transformation. There’s a long, long way to go.

“I would like to think that by and large we will have the vast majority of it done by the end of next year.

“It involves everything. It’s the network side, distribution, customer service, customer experience, people’s mindset, how the customers interact with us. We’ve got a huge challenge to be a more efficient organisation that is competitive on price. There’s more to do in that direction. It’s across the board. It’s everything.”