The Tribune

• CEO: ‘Been a while’ since last quarterly profit

• Adds: ‘We have certainly been turning corner’

• $85m fibre roll-out to start after June year-end

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas yesterday unveiled plans to refinance $169m in preference share debt, and slash annual interest payments by $500,000, after generating its first quarterly net profit for several years.

Franklyn Butler, the BISX-listed communications provider’s president and chief executive, told Tribune Business he was unable to recall when the last “consolidated” net profit was booked but conceded “it has been a while”.

Speaking after the group posted $1.462m in net and comprehensive income for the three months to end-March 2022, he added that Cable Bahamas has “certainly been turning the corner” through executing its US exit and using the $301m-plus Summit Broadband sale proceeds to restructure its balance sheet and lay the foundation for new domestic growth.

Besides the preference share refinancing, which will involve existing investors rolling over their holdings at a lower interest rate, Mr Butler said Cable Bahamas will proceed with its $80m-$85m roll-out of a fibre-to-the-home (FTTH) network after its 2022 financial year closes at end-June.

Acknowledging that this investment was “a bit of a defensive move” responding to the Bahamas Telecommunications Company’s (BTC) own FTTH infrastructure build-out, he said the BISX-listed provider was seeking to improve the experience for its TV and Internet clients while also providing a platform for further economic growth.

And, while providing no specific details or timelines, Mr Butler added that Cable Bahamas “in the not too distant future” hoped to reward its equity shareholders through the resumption of dividend payments that have been halted for several years while the group underwent its balance sheet clean-up and paying down of bank debt.

Victor Marcial, Cable Bahamas’ group chief financial officer, yesterday confirmed notices have been issued to investors holding its Series 6 and Series 9 preference share debt advising them these issues will be refinanced at interest rates some 0.25 percentage points below current rates of return.

The Series 6 preference shares, with a $103.5m principal value, carry a 5.75 percent interest coupon and were due to mature in May 2024. Meanwhile, the Series 9 preference shares, worth a collective $65.5m, have a 6.25 percent interest coupon and were due to mature in April 25.

Together, they represent 64 percent or almost two-thirds of the total $264.149m preference share debt on Cable Bahamas’ books at end-March 2022. The Series 6 interest coupon will drop to 5.5 percent from 5.75 percent due to the refinancing, while that for the Series 9 will fall by the same margin to 6 percent.

Describing investor reaction to the planned refinancing as “pretty positive”, Mr Marcial told this newspaper: “We’ve sent out a notice to the shareholders already. It will be about a $500,000 reduction in servicing costs, interest servicing costs. We did have a meeting with the brokerage houses, and with the amount of liquidity in the market, they’re very happy with the rollover...

“The way we’re looking at it, compared to government issues and other issues, the rates are pretty good, so most are happy to rollover especially as they do not have many options in the market.” Cable Bahamas must give the Series 6 and Series 9 preference shareholders three months’ notice before the refinancing takes effect, and Mr Marcial said he was hoping that would be formally issued either yesterday or today.

That way, from end-August onwards, Cable Bahamas can pay both the reduced interest coupon and avoid a “double interest” payment through the new preference issues replacing the old securities at that date. “We’re pushing to get the refinancing done by the end of June,” Mr Marcial added.

Mr Butler, meanwhile, said it was too early to determine what impact the Budget’s eliminations and reductions of import tariffs on communications equipment will have on its network infrastructure development plans. The present 45 percent duty rate on telecommunications towers is being eliminated, while the 20 percent levies on electrical cables and fibre optic cables are also going to zero. Optical line terminals will also become free as of July 1.

Import tariffs on base stations will be slashed from 45 percent to 20 percent, while head phones, wi-fi-devices and voice handsets will all go to zero from 45 percent (on the first product) and 10 percent on the latter two. And Communications Act fees paid by the likes of BTC and Cable Bahamas, currently set at 3 percent of turnover, will be cut by more than 50 percent in rate terms to just 1.25 percent of turnover.

Mr Butler and Mr Marcial yesterday said they understood the Communications Act fee reduction would only kick-in if communications providers invest in Family Island network build-out. The tax breaks unveiled by the Government appear to be an effort to incentivise The Bahamas’ two major communications providers and others to invest in rolling-out 5G (fifth generation) networks by reducing the costs involved.

Revealing that Cable Bahamas plans to press on with its fibre-to-the-home (FFTH) roll-out on New Providence and Grand Bahama regardless, Mr Butler said the investment involved remains pegged at around $80m-$85m. “We still anticipate it will be somewhere around that number,” he told Tribune Business. 

“The Government just gave some concessions to the telecommunications industry by reducing certain tariffs on telecommunications equipment. We spent some time last week reviewing what that means to us, but save and except any duty savings we have from that, we’ll continue with fibre-to-the-home.

“We have a lot of the raw materials on order or on their way. We anticipate that we’ll be in roll out mode very shortly after the close of this financial year, which is June 30. We continue to manage the supply chain; that’s the biggest risk. But we feel for all intents there’s little risk to us not getting started after we finish this financial year.”

While conceding that Cable Bahamas’ fibre-to-the-home initiative was “a bit of a defensive move”, Mr Butler said of the provider’s main competitor: “Let me say this. BTC, while they are making some progress, it’s not a ton of progress, but we are concerned about making sure we can improve customer service and reduce costs.

“We think with technology upgrades on the back of the pandemic, and the need for video conferencing, and to use technology in very different ways post-pandemic, fibre-to-the-home is the right one to upgrade our customer experience.”

These developments all come after Cable Bahamas converted a $1.176m net loss in the year-before period into a $1.462m profit for the 2022 third quarter, which closed at end-March. The group’s results have been weighed down for several years, and driven into losses, by accounting treatments that require it to book depreciation and amortisation losses associated with its Aliv mobile subsidiary’s network build-out, plus interest costs on the debt that financed this.

And, given that Cable Bahamas has Board and management control at Aliv, its results also have to include the share of losses incurred by the Government on its 51.75 percent stake in HoldingCo, the mobile operator’s parent entity. However, for the three months to end-March 2022, Cable Bahamas’ group profit of $5.031m offset the $3.569m government loss on Aliv.

“We’ve certainly been turning the corner,” Mr Butler told this newspaper of Cable Bahamas’ financial performance, indicating that he expects the third quarter results to be the start of a trend. Cable Bahamas’ revenues for the three months to end-2022 were also up year-over-year by $5m, standing at $54.376m compared to the prior year’s $49.374m.

“It’s really important for us to grow our way out of this,” the Cable chief told Tribune Business. Asked when shareholders will likely see the resumption of dividend payments, Mr Butler replied: “Let’s put it this way. We’re closer than we’ve ever been.

“I think we’ve been very intentional in our focus on the business, continuing facilities improvements, customer service improvements, looking at how nimble we can be coming off Dorian and the pandemic, and bringing the right financial stewardship to get us to the point where we have a positive net income.

“All this bodes well to get us to the point of reducing the level of long-term debt on the Cable side, which sets us up nicely, and in the not too distant future to reward our equity shareholders. I think we’re doing all the right things.”

Voicing optimism in “the outlook for the months ahead” provided The Bahamas escapes a major hurricane and further COVID lockdowns, Mr Butler added: “I think our shareholders have been very patient, and as chief executive I’m delighted to hopefully be crossing the bridge and putting us back on a footing where we create some long-term value and returns to our shareholders. That’s a significant place to be and I don’t take that lightly. I think we’re in good shape.”