The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Aliv is targeting an operating income "break even" position by summer 2019 as it transitions from start-up losses that totalled more than $109m during its first two years.

Damian Blackburn, the mobile operator's top executive, told Tribune Business yesterday that it was "growing in all segments of the market" as it moves from a nationwide infrastructure roll-out to focusing on service innovation for its now 125,000-plus client base.

He added that Aliv was porting, or transferring, "thousands" of former Bahamas Telecommunications Company (BTC) customers per month to its services, with some 43,400 having elected to make the switch over the past 14-17 months.

This helped Aliv's revenues near triple year-over-year, jumping by 183.7 percent from $12.871m to $36.526m for the 12 months to end-June 2018, due to the expanded subscriber base and improved yields.

Mr Blackburn revealed it is targeting a monthly average revenue per user (ARPU) range above $40-plus, with a "plan" already developed to grow it from current levels "well in excess of $30" as Aliv gains deeper penetration into the mobile data, corporate and post-paid segments of the market.

He added that there was already "a backlog" of local businesses wanting to become part of Aliv's first digital solution, The List, which rewards subscribers with discounts if they have an average monthly spend of $45 or more.

BTC's first mobile rival has also just launched its "refer-a-friend" initiative, which rewards subscribers who persuade others to transfer to its services, while two apps billed as "transforming" the tourism and charity sectors will be launched before the calendar year-end.

"The critical thing is we are growing in all segments of the market having got a full suite of products out, the last of which was consumer post-paid," Mr Blackburn told Tribune Business. "I'm confident about market share growth.

"Where we're now focusing is innovation. Now people have got these good smart phones in their hands, what do they want to use them for? What can Alive deliver?"

Mr Blackburn said Aliv's subscriber base was now over 125,000 on a 60-day retention basis, having expanded further beyond the 110,000 recorded at its June 30, 2018, financial year-end.

Subscriber growth has been boosted by number portability's launch, albeit delayed, which allows Bahamian mobile communications users to keep their existing number when switching between BTC and Aliv as their service provider.

Mr Blackburn said number portability was key to creating mobile market competition given BTC's entrenched, long-standing monopoly that had already gained significant penetration among consumers.

"The market was so penetrated before Aliv came in that number portability was a very necessary condition to competition, which Cable Bahamas had argued strongly for before Aliv was formed," he added. "It's proven to be a very necessary part of the mix."

Cable Bahamas, which has Board/management control and a 48.25 percent equity stake in Aliv, emphasised the importance of number portability in its just-released 2018 annual report.

"A significant boost to our network was the recent introduction of mobile number portability," Cable Bahamas said of Aliv. "This was key in allowing mobile subscribers the opportunity to keep their current mobile numbers if they switch from one mobile service provider to another. To date, we have ported 43,400 customers to our network, 36,000 of which came from the competitor's [BTC's] pre-paid service alone."

The BISX-listed communications provider expressed confidence in Aliv's continued top-line growth, disclosing that the latest projections - based on the most recent quarterly results - showed "annualised" revenues of $43.5m.

"Revenue in all segments has seen significant growth over the operating periods, and is expected to continue within the next 12 months," Cable Bahamas said. "Annualised revenues have increased steadily, with 2018 indicating a forward annualised amount of $43.5m.

"This annualised revenue also underpins the future revenue forecast. Market share has grown to over 30 percent, and further growth is projected to reach 39 percent in financial year 2019 - a terrific achievement just 33 trading months after launch."

Aliv's 2019 market share projection represents a further increase on the 33 percent it was said to hold at end-June 2018, with Cable Bahamas adding: "The revenue growth demonstrated in financial year 2018 was a factor of both the 34 percent growth in subscribers and the increased average revenue per user (ARPU).

"This increased ARPU was largely driven by the increase in data consumption by all subscribers. Profitability improved further as the operational cost base stabilised as the network roll-out was completed."

Mr Blackburn told Tribune Business yesterday that Aliv's ARPU margins/yields will further improve as it penetrates deeper into the mobile data segment, together with the more lucrative corporate and post-paid markets.

Revealing that current ARPU yields are "well in excess of $30," he added: "We have a plan that is going to grow it as we deeper penetrate each segment. The industry average is typically in the 40 percent range."

Start-up costs associated with Aliv's November 2016 launch, namely the build-out of its network infrastructure and subscriber acquisition, have resulted in losses of $55.538m and $53.879m for its first two years, respectively.

Mr Blackburn said cash flow and operating income, rather than "bottom line" net income, were a better measure of Aliv's success to-date given that it typically took mobile start-ups anywhere from three to five years to generate their first profit.

With Aliv now beginning its third year, he added: "We're working very hard to hit the key metrics. We're targeting, as much as we can, to get to the point where we will hit that operating break even by next summer. We're getting within touching distance."

Cable Bahamas' annual report sought to reassure shareholders over Aliv's financial performance to-date, noting that the telecommunications industry's capital intensive nature was exacerbated by the high subscriber acquisition costs that had to be paid to make inroads into BTC's long-established customer base.

"The financial year ending in 2018 reflected the realities of building a company in the capital intensive telecommunications industry," it said. "The costs of acquiring spectrum and operating licenses, building technologically advanced networks and support systems, and negotiating interconnection rates with other operators and the Internet providers all must be incurred before any revenues can be achieved in any material way.

"The company also had to confront the marketing costs of acquiring subscribers in a marketplace that had over 90 percent mobile phone penetration upon the date of our license acquisition on July 1, 2016.

"These subscriber acquisition costs are visible in the subsidies of mobile phones and other devices needed to induce new customers to take services, are also particularly high and led to the losses that were incurred in the two first years of trading."

Mr Blackburn told Tribune Business that subscriber acquisition costs were "a feature of the industry", and that those paid by Aliv were not excessive or out of line when compared to global norms.

"I wouldn't say it's out of line with other places," he said. "We have to compete heavily on making sure people have the phones they want. We're an Apple market, always have the Samsung S phones, and have brought in cost conscious phones from Samsung and Alcatel.

"I wouldn't say it's any more or less than other places for the stage of evolution of the market. It's the normal modus operandi. There are significant costs associated with that, but we're happy with the efficiency of what we've done here."

Cable Bahamas, confirming that its mobile affiliate is now focused on service delivery, wrote in its annual report: "The first of these digital solutions was The List; The Bahamas' most comprehensive rewards programme, and the only one that is digitally-based.

"The List allows Aliv customers to receive rewards from participating partners simply for being an Aliv subscriber with an average monthly spend of $45 or more. The programme encourages high ARPU spend, provides another reason for new subscribers to join the network, and supports the outreach and marketing strategies of participating vendors and businesses.

"Other digital strategies that Aliv will formally launch before the end of the year 2018 include a digital refer-a-friend programme and two apps that will transform the tourism and charitable industries - the Discover and Together apps respectively."