LONDON, United Kingdom, Thursday February 10, 2011 – Telecommunications giant Cable & Wireless says its Caribbean operations continue to suffer amid adverse economic conditions and earnings won’t increase in the second half of the financial year.
In a third quarter statement issued yesterday, Cable & Wireless Communications Plc (CWC) said it expected earnings by the end of the fiscal year in March to remain flat at around US$115 million.
“The one region that remains very difficult is the Caribbean where we see the market continue to be challenging with tourist spend and, hence, consumer and business disposable income significantly below historic levels,” said CWC Chief Executive Officer Tony Rice.
“I described the [Caribbean] market at the half-year as bumping along the bottom and there’s no change in that.”
Rice said some progress was made in the mobile market and, as a result, revenue increased in the quarter. However, lower margin enterprise revenue, higher subscriber acquisition costs, and higher interconnect costs in Jamaica are expected to reduce gross margins.
He said the disruption caused by Hurricanes Tomas and Earl in Barbados, St Lucia and St Vincent and the Grenadines late last year also contributed to the downturn in business, costing CWC about US$5 million in damages.
“Operating costs were higher, reflecting an increased investment in marketing in respect of the LIME brand and the Christmas promotion campaign, specifically for new services such as mobile TV. This investment is laying the foundations for future growth but in the short term we face difficult trading conditions,” the CWC boss said.
Sale of Bahamas company finalised
But the performance will not cause the company to sell or restructure its Caribbean operations or stop it from investing in the region, Rice said.
In fact, CWC announced yesterday that it had signed the final agreement to purchase majority interest – 51 percent – in Bahamas Telecommunications Company Ltd (BTC) for US$210 million.
Rice said that was the move was the first step towards strengthening CWC’s portfolio.
“BTC is a business with strong prospects and is well positioned in one of the region’s best economies. It will form a key part of our Caribbean business, benefitting from our regional platform and scale, while maintaining its Bahamian character,” he said.
On completion of the transaction, which is expected to be around the end of March, CWC will be primarily responsible for the day-to-day management and operation of BTC under the terms of a Shareholders’ Agreement with the Bahamas Government.
Meantime, Rice said CWC has also made advances in extending and improving our product and service offering. He pointed to the launch of mobile TV in Jamaica and the company enhancing its network with the opening of the East-West cable linking Jamaica, the Dominican Republic and BVI a few days ago.
The CEO said the company had also invested in product capability and brand to position itself to grow market share and improve profitability when economic conditions improve.
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