Published On:Monday, January 23, 2012

By NEIL HARTNELL

Tribune Business Editor

THE BAHAMAS Telecommunications Company (BTC) is ultimately aiming to expand its EZTop-Up cellular product to 5,000 points nationwide, as it gears up for the second of three margin adjustments.

Marlon Johnson, the newly-privatised carrier's spokesman, declined to get into the specifics of margin/rate adjustments that Tribune Business understands are due to take effect imminently, citing commercial confidentiality.

However, he said any rate adjustments would only impact BTC's "master distributors" (wholesalers), with no effect being felt by retailers and street-side vendors of the company's cell phone minutes.

Confirming that BTC currently had around 2,000 EZTop-Up points for consumers to electronically add cell phone minutes, Mr Johnson disclosed that the carrier ultimately wanted to grow this to a 5,000-strong network, providing nationwide coverage throughout New Providence and the Family Islands.

Informed sources close to the matter, speaking to this newspaper on condition of anonymity, told Tribune Business that BTC would soon implement the second of three planned cuts to the margins enjoyed by its wholesalers.

The first, implemented last summer, slashed the margins enjoyed by BTC's wholesale master distributors from 25 per cent to 16 per cent for EZTop-Up, and from 25 per cent to 12 per cent for phone cards. It is understood that this second margin cut, the second in what was termed "three tranches", will reduce the EZTop-Up margins to 14 per cent, and those for phone cards to 10 per cent.

Tribune Business understands that the margin cuts are being phased-in to allow BTC's 'master distributors' time to adjust their business plans. And Mr Johnson was also adamant that any future margin adjustments would not impact retailers who, this newspaper was told, following last summer's adjustments that saw their EZTop-Up commissions cut to 6 per cent, and those for cards drop to 3 per cent.

Contacted by Tribune Business about the upcoming rate/margin adjustment, Mr Johnson said: "There's nothing we'll be doing in relation to the rates that we have not discussed.

"When we began talking to our master distributors, we would have discussed with them the full arc of what we're going to do with the rate adjustments, and so this is nothing new.

"None of our master distributors indicated to us they were not privy to it. We started doing this back in the middle of last year, so they cannot say they do not know what's going to happen."

Mr Johnson explained that BTC's EZTop-Up wholesalers were tied into contractual relationships with the carrier, now majority-owned by Cable & Wireless Communications (CWC), and which has a cellular monopoly until at least mid-2014.

"Anything we're doing with the rate adjustments was discussed at length, and forms part of existing contractual relationships," he added. "There's nothing in the pipeline of activities relating to master distributor relationships and rates that wasn't discussed with them, and in their contracts."

Asked about any margin cuts for BTC's retailers, Mr Johnson said: "The bottom line on this is that it's only going to affect the master distributors. The retailers will not feel any part of it."

BTC's first-phase margin cuts caused a temporary shock to the market when implemented in July 2011, with many street vendors temporarily (at least) disappearing until the dislocating effects worked themselves out. Some vendors even took to selling phone cards above face value, in a bid to compensate for the margin cut.

And BTC's majority owner, CWC, confirmed last year that the first phase margin cuts had enabled the telecoms carrier to recoup some $8 million per annum.

Tony Rice, CWC's London-based chief executive, said EZTop-Up had been introduced to the Bahamian market "three months ahead of schedule", enabling it to cut wholesale/retail margins to levels more in line with global benchmarks.

"This has enabled us to reduce mobile distribution commissions on pre-paid cards to market norms," Mr Rice added, "and to recover cost opportunities which, in a full year, would be around $8 million in savings."

Mr Johnson, though, confirmed to Tribune Business that bringing the EZTop-Up and phone card margins in line with international market norms was "part of" BTC's strategy. The main focus, though, was to manage "the entire channel" of cellular phone minute distribution, thus improving the carrier's interaction with consumers and the latter's experience.

BTC, Mr Johnson added, was committing "more marketing dollars" to support its cellular distribution network, and wanted to enforce contracts to boost relationships between wholesalers, retailers and consumers "to the benefit of the entire channel".

"It's not just about rate adjustments, but the way we manage the entire channel," he told Tribune Business. "We want to expand the number of touch points, so people feel confident that when they touch BTC, they are treated properly. We're really trying to manage the channels, and control the experience properly."

Asked about BTC's long-term EZTop Up plans, Mr Johnson added: "We probably have around just over 2,000 Top-Up channels, and our ambition is to grow that up to 5,000 ultimately.

"One of the things we've put renewed emphasis on is to market the channels properly, and give them collateral support to increase visibility out there in the channels, and give them increased training and support.

"The better we train the wholesalers on marketing, technology and equipment, the further they will pass it down the channel to the retailers."