Caribbean performance hurting C&W earnings
Friday May 27 2011 | 03:46 AM

Telecommunications giant Cable & Wireless (C&W) is reporting that tough economic conditions in the Caribbean have resulted in further downturn in its business in the region, with the Jamaica market of particular concern.

In its annual results released yesterday, Cable & Wireless Communications Plc (CWC) said that while the group’s profits rose overall by 21 percent to US$462 million, Caribbean business declined by three percent.

CWC Chief Executive Tony Rice said the company has had to “navigate some choppy waters in the Caribbean”, which accounts for 30 percent of the group's revenue.

“The Caribbean has been more difficult than we anticipated at the time of demerger (in March) and we continue to face weak or declining economies across the region,” Rice said.

“Looking ahead, 2011/12 will be a year of transition and investment for CWC…However we are cautious on the economic and financial outlook for the Caribbean,” he added, noting that the company expects earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between US$180 and $210 million – excluding the Bahamas operations –, down from US$229 million for the year ending March 31, 2011.

CWC said that as a result of the 51 percent stake it recently acquired in the Bahamas Telecommunications Company (BTC), it expects that business to achieve EBITDA of approximately US$100, taking into consideration savings from restructuring and efficiency programmes.

In a breakdown of the performance of its various services in the Caribbean, CWC said mobile revenue was six percent lower; fixed voice revenue fell nine percent; broadband and TV revenue improved six percent even though broadband subscribers declined; and enterprise, data and other revenue was 11 percent higher than last year.

According to the report, lower usage and a higher rate of subscribers leaving the company caused the revenues to slide, primarily in Jamaica, as a result of the economic environment.

CWC said its business in Jamaica also faced other challenges. 

“The regulatory environment in Jamaica continues to be a concern and we are taking appropriate steps so that the proposed merger between two mobile competitors in Jamaica will not further undermine the ability of our business to compete effectively,” the report said, making reference to the announced deal between Digicel and Claro.

Digicel announced in March that it would acquire Claro in Jamaica and sell its own businesses in El Salvador and Honduras to Claro’s parent company, América Móvil, but the companies are still awaiting approval from regulatory authorities.

In its outlook for the Caribbean, excluding the Bahamas, CWC said it does not anticipate market conditions to improve materially in 2011/12. 

“Any modest increases in GDP are unlikely to significantly reduce unemployment or materially improve disposable income during the next 12 months, both of which are key drivers for our business,” it said.

“We anticipate inflationary pressures to have a negative impact on operating costs, especially salary and utility costs, two of the largest operating cost items. We continue to invest in new initiatives to position the business for the recovery, but benefits from the investments are unlikely to be significant in the current economic environment.”

Rice has indicated, however, that there are no plans to exits the region.

"We've been there for a hundred odd years and we expect to see it through," he said.

Following the news that C&W’s profits were being hit by declining revenues in the region, shares in the group dropped by more than nine percent to their lowest level since the demerger that split the company into Cable & Wireless Worldwide, which focuses on telecoms services to business mostly in the UK, and CWC, which runs consumer telecoms services in 38 territories outside the UK.