The Tribune

• Mobile operator drags on BISX-listed parent

• Gov’ts total share of losses now over $70m

• But Cable’s 2022 Q1 loss slashed by 64%

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Aliv’s near-$41m loss for the year to end-June 2021 continues to drag on both its BISX-listed parent and the Government, just-released financial statements reveal.

Cable Bahamas’ annual group results disclosed that the mobile operator’s performance continues to weigh heavily on its near-term outlook, with those losses responsible for dropping it back ‘into the red’ following a profitable 2020 that was achieved via the $301m-plus proceeds from the one-off Summit Broadband sale.

Franklyn Butler, Cable Bahamas’ group chief executive, could not be reached for comment before press time last night, but the financials also reveal the sustained, continued losses being suffered by the Government due to its majority shareholding in Aliv.

By virtue of its 51.75 percent equity stake, the Government’s share of Aliv’s 2021 financial losses was pegged at $22.107m. That represented a 17.3 percent decline from the prior year’s $26.573m share of the mobile operator’s ‘red ink’, with the Government having suffered a collective $70.403m loss over the near-five years since Aliv launched in November 2016.

Cable Bahamas holds the remaining 48.25 percent equity stake, and Board and management control, in the mobile phone operator which ended the Bahamas Telecommunications Company’s (BTC) monopoly in that market segment.

While many Cable Bahamas’ shareholders are likely to be alarmed at the extent of Aliv’s losses, executives from both the BISX-listed communications provider and its mobile subsidiary have repeatedly argued that the journey to achieving profitability for the latter is a marathon and not a sprint.

Damian Blackburn, Aliv’s former top executive, told this newspaper earlier this year that its positive earnings before interest, taxes, depreciation and amortisation (EBITDA) growth was a better measure of the company’s performance as a start-up mobile operator.

He explained that net or “bottom line” profitability is a longer-term objective that industry players typically reach in their seventh to tenth years due to the heavy investment in network build-out and the subsequent “depreciation” that attracts on balance sheet and income statement values.

The figures unveiled by Cable Bahamas seem to provide some support for this argument. Aliv’s revenues rose 8.5 percent year-over-year to $83.314m, compared to $76.811m for the year to end-June 2020. Operating expenses, meanwhile, remained flat at $70.558m for the 12 months to end-June 2021 as opposed to $70.834m in the prior year.

What drove Aliv to its net loss was continued interest expense on the debt incurred to build-out its nationwide mobile network infrastructure, plus the depreciation and amortisation charges that Mr Blackburn cited to this newspaper in early 2021. They stood at $19.886m and $26.517m, respectively, combining to account for $46.4m worth of expenses. This compared to over $42m in 2020.

While some may argue that these are so-called ‘paper losses’ related to accounting treatments and practices, and having to include the Government’s share, others are likely to retort that a loss is a loss. And it is unclear how patient Cable Bahamas shareholders are willing to be in waiting for Aliv to turn a net profit, especially given that the Bahamian capital markets are extremely dividend driven.

For Aliv’s loss wiped out more than $12m in net profits generated by Cable Bahamas’ TV, Internet and fixed-line businesses over the 12 months to end-June 2021. The BISX-listed communications provider’s group-wide loss was pegged at just over $28m due to the ‘red ink’ incurred by its mobile subsidiary.

However, Cable Bahamas’ 2022 first quarter results released yesterday indicate that both group and Aliv’s performance have improved subsequent to the 2021 year-end with the mobile operator likely losing around $8m for the period based on the $4.522m hit taken by the Government.

And, while Cable Bahamas suffered a $2.009m group net loss for the period based on having to incorporate the Government’s loss in its accounts, that represented a 64 percent year-over-year reduction on the $5,524m impact suffered in the 2020 first quarter.

The communications provider’s share of Aliv’s losses also appears to have been dwarfed by profits from its other business segments, as “net and comprehensive income” attributable to its own operations stood at $2.513m.

Elsewhere, Cable Bahamas said it had come back into compliance with covenants related to $60m worth of outstanding bonds after the terms were amended following consultation with the issue’s trustee.

“During the 2020 fiscal year, the group was not in compliance with the financial covenants of the notes as set out in the trustee agreement. As a result, the notes were classified as current liabilities in the comparative consolidated statement of financial position,” Cable Bahamas’ 2021 financial statements said.

“During the year ended June 30, 2021, the trustee agreed with the group to amend the notes’ trust deed covenants. The amended covenants became effective as of June 30, 2021. As such, the notes were reclassified to non- current liabilities in the consolidated statement of financial position.”

Cable Bahamas has also recognised a provision over its ongoing struggle with the Utilities Regulation and Competition Authority (URCA) over whether the latter or the Grand Bahama Port Authority (GBPA) is responsible for regulating its Freeport subsidiary.

“During 2016 and 2017, URCA issued preliminary determinations outlining perceived breaches by the group relating to the non-payment of fees with respect to operations in Grand Bahama. URCA believes that the group is in breach of Parts IV and XVI of the Communications Act and, as such, has pursued regulatory measures against the group with the view to resolve this matter,” Cable said

“The group, however, has maintained that based on provisions of the Hawksbill Creek Agreement, URCA does not have a legal basis to license its operations in Grand Bahama, and has commenced legal proceedings to support the group’s position. As at June 30, 2021, a provision has been recognised for what the group considers to be a probable future outflow.”