By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
Achieving EBITDA margins greater than 30 per cent is vital to the Bahamas Telecommunications Company (BTC) maintaining annual capital expenditure at around $40 million, a senior executive has confirmed
Marlon Johnson, BTC’s senior vice-president of brands and marketing, told Tribune Business that the carrier and its Caribbean affiliates would need to generate healthy returns if they were to produce the cash flow, and profits, necessary to finance infrastructure upgrades “on a sustained basis”.
Speaking after BTC’s 51 per cent majority shareholder, Cable & Wireless Communications (CWC), revealed plans to strip out $100 million of costs group-wide over the next two years, Mr Johnson said the Bahamian carrier had its own “ambitious target”.
Emphasising that BTC was not looking at another round of major staff reductions, and was focusing on “non-human resources” costs, Mr Johnson told Tribune Business: “The challenge for the [CWC] group, and for BTC, is becoming much more efficient operationally.
“A big driver is the investment we’re making in our IT core [the Next Generation Network]. That will allow us to reduce expenditure in terms of electricity, buildings to house it and maintaining it, as it will be more efficient.
“We have a lot of planned efficiencies,” he added. “You’re going to see us making a more concerted effort to improve our online presence, and when a customer call or contact comes in, make it easier with self-service. It will make us more efficient and reduce the paperwork.
“The long and the short of it is that we have to find smarter ways of increasing our footprint and doing what we need to do. Our challenge is to become more cost efficient and give ourselves the headroom to reduce prices. If we want to become price competitive in the long-run it will be tied to efficiency.”
BTC’s revenues for the year to end-April 2013 were relatively flat year-over-year, CWC executives confirmed, due to price cuts of up to 40 per cent as the carrier prepares for competition next year. Volumes, though, were up, as well as revenue per cellular subscriber (yields).
When it came to BTC’s own cost reductions, Mr Johnson said: “We have an ambitious target. We believe we have a lot of non-human resources costs we can manage a lot better in the business.
“We have a clear focus on non-human resources costs - getting better network efficiencies, more automated processes, expanding our retail footprint in a much more efficient way.”
A key element of the latter goal is BTC’s recently-announced retail franchise expansion, which aims to add another 30 franchise stores - run and owned by Bahamian entrepreneurs - within 18 months. The planned roll-out could inject up to $8 million into the economy via construction and support services expenditure.
“We have a clear sense of where we want to go. We recognise there’s no quick fix to get there,” Mr Johnson told Tribune Business.
“We still have to deliver. The demands from the customer are getting greater. They want more bandwidth for their dollar, more value added. And the competition is increasing, not decreasing.”
He added that BTC and its affiliates in CWC’s Caribbean regional business, LIME, faced a “shared challenge” due to the constant evolution of communications technology.
Referring to CWC’s target of a minimum 30 per cent EBITDA (Earnings before Interest, Taxation, Depreciation or Amortisation) margin target for the Caribbean region, Mr Johnson said: “Infrastructure needs to be built and replaced, and that allows us to continue to invest at $40 million [per annum].
“We envision that we’re going to need that on a sustained basis. If we want to upgrade plant, replace old plant and add new technological elements, we have to make sure our returns are healthy.
“That will be key to success in the long-term. If we look at it going forward, we have to stay in that [30 per cent] range if we want to continue that capital expenditure.”
Top Cable & Wireless Communications (CWC) executives, addressing last week’s conference call on their 2012-2013 annual results, conceded there was “more work to be done” at BTC despite the carrier effectively accounting for much of the year-over-year improvement in its Caribbean business.
CWC’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.
Comments
John 11 years, 5 months ago
Marlon Johnson has to be one of the biggest hypocrites in the Bahamas. On the one hand he is here telling us that BTC wants to make 30% gross profit (earnings before EBITDA) on its investment while, on the other hand, he is telling persons who sell BTC top up and phone cards that they must settle for 3-6 percent gross profit on their sales. So, in essence, Johnson is saying while BTC expects to have $1.50 or 30% of $5.00 left after it sells a $5.00 card and pays its expenses, the retailer is only given 25 cents to sell a $5.00 and pay ALL his expenses. Do you know that less than 50% of the persons who now sell phone cards and /or Top Up for BTC discontinue the service within 6 months to a year? And do you also know that most of the smaller vendors who sell these products do not make a profit? In fact it costs many of them more to sell the phone cards and top up so they actually sell at a loss. And that does not even include compensation for their own time that is invested in selling they products. Some may argue why persons continue to sell top up or phone cards if they make no money. And why does BTC continue to give its vendors such a slim margin. The answer is quite simple. BTC is the sole provider of cell service in the Bahamas, and the demand for is product will remain constant, regardless of how many vendors there are in the market. So the market is driven by demand. Vendors are somewhat duped into the idea that because the top up and phone cards are selling and in such high volumes, there is some profit to be made. But starting off with a 3-5% margin (some 5-7 times smaller than what BTC expects to see after paying its operating expenses) thy never reach the point where their own revenue exceeds their expenses and they could realize a profit. So in essence they are providing their services to BTC for free or even at a cost to their own selves. Yet BTC is smiling all the way to the bank , ear to ear, and proudly sponsoring every major event in this country, regattas, junkanoo and Carifta included
John 11 years, 5 months ago
It will be interesting to see how BTC will change its pricing policy and margins for its vendors when competition comes into the market place. NO longer will there be a strict, monoploitic demand for its phone cards. Vendors will base their decision to sell products on their ability to make profit and consumers will have choices on price, product, promotion among other things. This is already visible in the cell phone market, where BTC has conrered the market on high end phones by slashing prices, so much so that many vendors no longer carry the models that BTC sell.
John 11 years, 5 months ago
Apparently a major food retailer is about to discontinue sales or scale back on its Top Up distribution. Top up is now available at all the cashiers in all the retailer's stores, unlike when it was only available at the drug counter or from the manager. While the sales are up significantly, many top up dollars go unaccounted for. In fact with the small profit margin, sometimes the shortages are more than the profit so the retailer is thinking about going back to the old way of doing business to have better control .
holymoly 10 years, 3 months ago
BTC is one of the best telecommunication companies and it provides quality services to its customers. Moreover it has some great stores in Bahamas where you may find advanced technology mobile devices and also some awesome http://www.wirelessphonegallery.com/pho…">cell phone accessories.
zinos85 9 years, 5 months ago
They do have set an ambitious target for themselves and now they are set to achieve this goal. But they should not only focus on achieving profit, they also have to concentrate on providing better service for both personal and business communication needs. These days one can access the communication services online, for instance, if you need business communication services then you can find the solution at http://www.accuvoipservices.com/">http://www.accuvoipservices.com/.
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