The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas’ top executive yesterday asserted the group is poised for “monumental improvement” in profits if it can reach agreement with the Government on refinancing Aliv’s debt at lower interest costs.

Franklyn Butler, the BISX-listed communications provider’s chief executive, told Tribune Business that “the key” to its fiscal 2024 performance will be “getting the Government to agree what structure and contribution they want to make” to a mobile operator in which the latter the majority 51.75 percent equity interest.

Arguing that Aliv, which is presently paying preference share investors an interest coupon of 8-8.5 percent, “shouldn’t have to pay such a premium” for its financing, he described reaching consensus with Cable Bahamas’ fellow shareholder as “the number one priority” for the group in its current financial year.

And, speaking after Cable Bahamas incurred a $16.008m fourth quarter loss that wiped out profits generated during the first nine months of the year to end-June 2023, Mr Butler disclosed that among “certain one-off costs” incurred during that period was a sum set aside to pay tax liabilities associated with a VAT dispute with the Department of Inland Revenue (DIR).

Declining to provide details, given that attorneys are dealing with the tax authorities on Cable Bahamas’ behalf to resolve the dispute, he nevertheless pointed out that the company’s ordinary shareholders had enjoyed a near-$5m profit for the 12 months to end-June despite the overall $8.716m net loss.

The latter was incurred because accounting rules require that Cable Bahamas consolidate the Government’s Aliv losses of $13.649m into the group’s overall results, which produced the net comprehensive loss of $8.716m - itself a 22.6 percent decline on the prior year’s $11.256m worth of ‘red ink’.

Acknowledging that accounting write-downs, namely depreciation and amortisation, relating to the value of Aliv’s mobile network continue to impact Cable Bahamas’ results, Mr Butler explained that refinancing its affiliate’s debt will produce immediate returns for shareholders by helping to lower the near-$20m collective dividends paid on the group’s total preference share debt in the year to end-June 2023.

“Amortisation and depreciation are obviously very significant,” Mr Butler told this newspaper, “as well as interest payments as it relates to some of the debt in Aliv, which ought to be refinanced at some point. We’re trying to work through that with the shareholders of Aliv. Once we do that, it will change things significantly.

“I’m unable to give any real, broad details. We are working with the shareholders to see what would be possible. Once there is clarity on that, certainly around the annual general meeting (AGM) time, we will give clarity around what that refinancing should look like. We’re trying to get the Government to agree on what structure and contribution they want to make to the company.”

The Government holds a 51.75 percent majority stake in Aliv, with Cable Bahamas owning the 48.25 percent balance and enjoying both Board and management control. Mr Butler gave no indication of how much Aliv debt will likely be refinanced, but added: “We’re paying 8 percent to 8.5 percent on Aliv debt. Based on the business performance, we believe we should not have to pay such a premium on our debt associated with Aliv at this time.

“The key is going to be: Can we get the Government to restructure the Aliv balance sheet? That will be the first thing; the number one priority this year. The Alive fibre roll-out to improve the quality and dependability of the fixed network, and continuing to grow Aliv mobile.

“Those are our core areas going into 2024. If we can do that, we think we will end the year fairly positive. That’s what out focus is. The good news is it’s the Government, but only the Government. If we can get the Government to agree, that has a monumental impact on our business.”

Cable Bahamas saw its net comprehensive loss for the three months to end-June 2023 more than double compared to the prior year, rising by 166 percent to $16.008m as opposed to $6.026m. “We had certain one-off costs,” Mr Butler explained. “We had an accrual of tax liabilities and stuff that needed to be cleaned up with the VAT Department. We accounted for it.

“We don’t believe it’s due. It’s in dispute with the Department of Inland Revenue. We’ll see where it ends up. I don’t want to say too much at this stage. We have some lawyers dealing with it.” The sum involved, and what it relates to, were not disclosed.

Cable Bahamas fared better on its 2023 operating performance, which saw operating income increase by almost $7m year-over-year, growing by 52 percent from $13.406m in 2022 to $20.383m for the 12 months to end-June. This was driven by revenue growth outpacing that of expenses, with the top-line rising by 5.7 percent year-over-year from $217.981m to $230.419m.

Operating expenses, by contrast, rose by less than $5m year-over-year to $147.288m while depreciation and amortisation were also relatively flat, expanding by just over $1m to $62.748m. “We continue to grow revenue,” Mr Butler said. “We want to continue to find opportunities to grow and, of course, focus on service quality. That is continuing to make sure we invest in the mobile network, and making sure we continue to invest in Aliv fibre services.”

Turning to the latter, which is Cable Bahamas’ fibre-to-the-home infrastructure, he added: “We’ve had some challenges but we are back on track. We are at 23,000, maybe 25,000, homes passed right now. We’ll be going into those areas, connecting customers. We believe that by the end of this financial year we will have all of New Providence done.”

And, while the Cable Bahamas group posted a net comprehensive loss for the year to end-June, Mr Butler said he was encouraged by the near-$5m profit that accrued to ordinary shareholders. “We believe that, even though it may seem like $5m is a small profit, we believe we are well-positioned if we restructure the Aliv debt for a significant improvement in our net income from a group perspective.

“Internet is holding its own and continues to grow slowly, but it’s growing. Mobile is where we have most of our growth. On TV we continue to see some challenges with people cutting back on service, but that was still ahead of budget even for last year. The biggest challenge is the margin we’re paying for signal fees.”