The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) suffered a near-22 per cent profits fall to $29 million for the first half of its 2016 financial year, as revenues and margins came under pressure from mobile competition preparations.

The year-over-year decline from $37 million in the six months to end-October 2014 resulted from declines in most major revenue categories, as margins dropped 7 per cent - from $138 million to $128 million.

Phil Bentley, chief executive of Cable & Wireless Communications (CWC), BTC’s controlling shareholder, admitted in a conference call with analysts that it faced “challenges” in the Bahamas due to the imminent awarding of the second mobile licence.

While not naming Cable Bahamas, which has been selected as the preferred bidder, the CWC chief said the company “now expects a new entrant to enter the market early next year” around its April financial year-end.

Just how reliant BTC remains on its soon-to-expire mobile monopoly was brought into sharp focus by CWC’s results for the six months to end-October 2015.

They revealed that mobile generated $118 million, or almost 73 per cent, of BTC’s $162 million top-line for the half-year. That means that almost three out of every four dollars earned by the company is generated via mobile.

And both figures were down on prior year comparatives. Mobile revenues were down 6 per cent from the $126 million produced in the 2014-2015 first half, while total top-line was off 5 per cent from $171 million.

Perley McBride, CWC’s chief financial officer, told analysts: “In the Bahamas, revenue declined 5 per cent as we continued to prepare BTC for the advent of a second mobile company by updating our roaming agreements with international carriers.

“We anticipate a new mobile operator will enter the Bahamas market early next year, which will adversely impact performance in the outlook period.

“Our new IPTV product is due to be launched in the second half period, allowing our customers to access a leading quad-play offering. That is expected to partially offset the impact of a new mobile operator.”

Mr Bentley added that CWC was providing “increased direct technical support and commercial support” to BTC from its consumer and business teams.

He added that CWC was seeking to “add value” to BTC’s broadband Internet offering by deploying faster speeds of up to 100 Megabytes (MB) or more in a market “where historically 90 per cent of our customers have only received 5MB”.

CWC, in its results announcement, added that BTC’s mobile revenue for the half-year was impacted by the need to renegotiate lower roaming rates with international carriers in exchange for long-term contract extensions. As a result, average revenue per mobile user was down 9 per cent.

“The introduction of VAT on 1 January, 2015, led to a reduction in prepaid mobile revenue, versus the prior period, as disposable income fell,” CWC added of BTC.

“Data traffic grew 137 per cent following the additional investment in.... sites in the prior year, driving mobile data revenue up 60 per cent excluding roaming. Data penetration of our subscriber base is now 56 per cent, up 9 percentage points on the prior year.”

Elsewhere, BTC suffered a 4 per cent year-over-year drop in fixed-line voice services revenues to $23 million, as opposed to $24 million the prior year.

This was attributed to a 7,000 fall in subscribers to 95,000 from 102,000, as people substituted home phone lines for other products.”

Broadband Internet revenue, meanwhile, fell 13 per cent from $8 million to $7 million year-over-year.

“Subscribers grew by 4,000 as increased penetration of our high-speed DSL broadband services was more than offset by lower ARPU (revenue per subscriber) associated with our competitive offers,” CWC said of BTC.

“In the Bahamas, we hfl out our video product.

“We have commenced the roll-out of fibre infrastructure in New Providence and have upgraded the existing infrastructure in Abaco and Eleuthera to offer customers faster broadband speeds and facilitate provision of FLOW TV by the end of the calendar year, a key tenet of our growth strategy.”

The only growth area for BTC was managed services revenue, which rose by $1 million to $14 million, as the company increased sales to medium and large companies.

“Gross margin at $128 million was down 7 per cent compared to the prior year, reflecting the reduction in roaming revenue and higher subscriber acquisition costs as we drove increased smartphone penetration,” CWC said of BTC. “As a percentage of revenue, gross margin declined by two percentage points to 79 per cent.

“Operating costs reduced by $4 million, or 5 per cent to $75 million as we began to realise the benefits of the on-going cost reduction initiatives. Headcount decreased by 8 per cent to 719 in the period, and further initiatives will continue to right- size the cost base ahead of competition.

“Earnings before Interest, Depreciation, Taxation and Amortisation (EBITDA) of $53 million was 10 per cent lower than the prior year, with the EBITDA margin of 33 per cent declining by two percentage points as the impact of lower roaming revenue was not fully offset by operating cost savings.”

BTC’s $36 million worth of capital investments during the six months to end-October was 33 per cent higher than the year before, with 79 per cent of the spend geared towards its mobile and broadband infrastructure.