The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) will “not be immune” to the $100 million savings drive of its majority shareholder, which yesterday said its Bahamian asset’s operating costs were still “higher than we’d like to see”.

Top Cable & Wireless Communications (CWC) executives, addressing a conference call on their 2012-2013 annual results, conceded there was “more work to be done” at BTC despite the carrier effectively keeping its Caribbean business afloat.

Highlighting yet again BTC’s importance to CWC’s LIME business, the company’s annual results statement conceded that “much of the improvement has come from our Bahamas business” in referring to the 5 per cent year-over-year operating cost reduction in the Caribbean.

Tim Pennington, CWC’s chief financial officer, disclosed that while there had been no change in Bahamian cellular (mobile) customer numbers, and BTC’s revenues were “flat”, revenue per subscriber (ARPU) figures were increasing.

He attributed the “flat” revenues to price reductions of up to 40 per cent that BTC had implemented since it was privatised in April 2011.

And, with one eye on the April 2014 end to BTC’s Bahamian cellular monopoly, Mr Pennington conceded that the carrier’s operating cost ratios were higher than “the norm” CWC was targeting.

As a result, BTC will not escape CWC’s plan to reduce its own operating costs by $100 million over the next two years.

More than half this figure - some $60-$70 million - will come from further staff reductions, with CWC targeting, in particular, group-wide management lay-offs via a restructuring following the disposal of its Macau and ‘Monaco & Islands’ businesses.

The ultimate goal, CWC executives said, was to boost the operating or EBITDA (Earnings before Interest, Taxation, Depreciation or Amortisation) margins for the Caribbean region to greater than 30 per cent.

Meanwhile, assessing the performance of BTC’s cellular business, Mr Pennington told investment analysts: “Given that we don’t have any competition in the Bahamas, there hasn’t been much movement on the net subscriber numbers. That’s relatively flat. We’ve started to see some growth in the ARPUs (Average Revenue Per Unit) there.”

That implies BTC is starting to enjoy more revenue per subscriber, and that its yields and margins on the cellular side are increasing.

This will be important once the Bahamian cellular market liberalises. BTC’s monopoly expires next April, but realistically competition will probably not arrive until 2016, given that it will take one year to award a new cellular licence and another for the winner to build its network.

Among the likely contenders for that licence are Digicel and Cable Bahamas, and Mr Pennington yesterday indicated CWC was keenly focused on BTC’s future and preparing the carrier for competition.

“One of our critical objectives in the Bahamas is to get ourselves into a competitive position for the future,” Mr Pennington said, in response to an HSBC analyst’s questions.

“Not only have we been streamlining our cost base, but we’ve also been reducing our pricing there. We’ve made significant price reductions, which is why our revenues are flat.

“Customers are using more, using more of the services, using more of the data, but we’ve been driving prices down to make sure that when competition comes in we’re not at a disadvantage to international or regional prices.”

Noting that BTC’s main cost reductions had been achieved the previous year via the Voluntary Separation Programme (VSEP) that reduced staff headcount by several hundred, Mr Pennington added: “We’re just seeing the run rate benefits coming in there, plus some additional efficiencies going forward.”

And he added: “I think in terms of our future cost savings, we’re not segmenting where it comes from, as it will come from having a single platform.

“But I think it’s safe to say the Opex (operational expenses) ratio in the Bahamas remains higher than we’d like to see, and higher than the norm we’re targeting.

“It [BTC] won’t be immune to this [cost savings drive], but in terms of where we’re targeting out cost structuring, it will be across the piece, really.”

Earlier, Mr Pennington had praised BTC for driving a 2 per cent improvement in the CWC group’s revenues to $2.9 billion, and a 1 per cent rise in EBITDA to $905 million.

He said this “was helped by strong performances in the Bahamas, Monaco and Macau”.

He was backed by Tony Rice, CWC’s chief executive, who said: “We saw BTC broadly maintain its revenue level, but we saw revenue pressures across the rest of the Caribbean.”

This again shows why CWC had to acquire majority control at BTC, and Mr Rice described the deal as a key first step in making his company a customer, data-centric carrier that was focused almost exclusively on the Caribbean and Pan-American region.

“On the plus side, since the demerger, we’ve acquired BTC. There we’ve delivered a significantly better product and service offering and value proposition, higher profitability and significant price reductions for customers. There’s more work to do there, but we’re pleased with the progress to-date,” Mr Rice said.

However, the CWC top brass again made no mention about their discussions with the Government over Prime Minister Perry Christie’s ambitions to regain a majority equity stake in BTC.

Nor was the issue raised by the investment analysts covered by CWC, indicating that the issue appears to have ‘dropped off the radar screen’ - at least for the moment - of the London markets and analysts.

It thus appears that the Government’s bid to regain majority control is only at the forefront of the Government’s mind.

CWC yesterday said it had invested more than $100 million in BTC over the past two years, including completion of the 4G mobile data network and a Next Generation Network (NGN) to replace around half the company’s existing landline platform.

While mobile data traffic had risen by 28,000 per cent, mobile calls had also risen from 2.5 million to three million per day on average.

BTC now plans to increase the number of retail franchises by 20-30, creating new businesses run by Bahamians.