The Tribune

By NEIL HARTNELL

Tribune Business Editor

CABLE Bahamas yesterday warned Bahamians to "expect great things" in 2012, as it targets "significant upside" from its newly-launched fixed-line voice services that already account for between 10-12 per cent of total revenues.

Emphasising that the BISX-listed provider was "definitely looking at all" opportunities created by the newly-liberalised Bahamian communications market, Barry Williams, its senior vice-president of finance, told Tribune Business that Cable Bahamas did not expect last year's trend, where expenses grew at a faster rate than revenues, to be repeated in 2012.

Pointing to "one-time hits" connected to Cable Bahamas' 'Rev' rebranding and product launches as factors that increased its costs in 2011, Mr Williams said the company would also enjoy its first full year of fixed-line revenues/profits in 2012.

Other expense challenges in 2011 came from programming and electricity costs, the latter's fuel surcharge up 60 per cent year-over-year, while the new Business Licence Act also imposed a form of 'double taxation' on Cable Bahamas, Tribune Business was told.

Mr Williams said this was counterbalanced to some extent by continued top-line improvements, as Internet subscriber numbers rose 3 per cent year-over-year, while revenues from Cable Bahamas' Caribbean Crossings/Maxil data business were up 9 per cent.

Disclosing to Tribune Business that Cable Bahamas' $20.843 million net income for the 12 months to end-December 31, 2011, was "not too far off" its own expectations, Mr Williams added: "Certain things didn't pan out the way we had planned."

Top of the list was the acquisition of the Systems Resource Group (SRG)/IndiGo Networks fixed-line voice services business, something Cable Bahamas had wanted to close by end-March 2011, but did not complete until May.

"That was probably the significant piece as it relates to the actual plan," Mr Williams confirmed. "We had actually planned for it to kick-in in March 2011, and did not actually get it done until May.

"That was a two-month revenue and expense lag, but there was profits that also didn't kick in as planned. That was the major setback for us in 2011, because we did not get all the approvals in as fast as we thought we would. Apart from that, we were not far off plan."

Mark Cabrelli, Cable Bahamas' vice-president of sales and marketing, disclosed to Tribune Business in a recent interview that the company currently had a 9,000-strong fixed-line voice services customer base.

While some 3,000 of those clients were inherited from the SRG acquisition, Mr Cabrelli said 6,000 had joined following the 2011 fourth quarter ReVoice launch - a growth rate of around 1,000 subscribers per month.

Cable Bahamas' total operating costs rose by 18.5 per cent to $55.561 million in 2011, a growth rate that exceeded the 12.3 per cent revenue increase to $99.851 million. Disclosing that such a trend was not expected for 2012, Mr Williams said one contributor to the cost increase was the reformed Business Licence Act.

Previously, as a communications provider, Cable Bahamas did not have to pay an annual Business Licence fee, since it paid television franchise fees to the Government and other fees to the then-sector regulator, the Public Utilities Commission (PUC). The new Act eliminated this exemption, requiring Cable Bahamas to pay an annual Business Licence fee on top of its URCA and Communications fees.

"We did pick up a Business Licence fee in 2011, and we had increased costs on that. We are paying 0.75 per cent of gross revenues," Mr Williams confirmed. "It is a bit of double taxation in a sense, especially when you look at how we were paying fees in the past."

Then, Cable Bahamas was largely paying fees levied on particular revenue streams. Now, in addition to the Business Licence fee, it is paying 3 per cent of gross revenues in a Communications fee, and just under 1.5 per cent as its URCA fee.

Elsewhere, Mr Williams said Cable Bahamas saw electricity costs rise 22 per cent year-over-year, with the fuel surcharge component up 60 per cent compared to 2010, while the addition of extra channels and content contributed to a 23 per cent year-over-year increase in programming costs.

"One of the things that contributed to the expenses in 2011 was the massive rebranding campaign and new services launch," Mr Williams told Tribune Business. "Those costs are one-off costs, and they were probably around $500,000-$700,000 in total. Those promotions are one-time charges.

"We did launch voice services last year, and did have a video offering as well. Those were one-time hits. We don't expect to see those again. You don't rebrand every year. We shouldn't, and don't expect, to see them in 2012.

"Costs are higher in comparison to revenues last year, but that isn't expected to be the trend we see in 2012."

Pointing out that Cable Bahamas' top-line was also expected to grow, Mr Williams added: "We remain optimistic, and have got some new opportunities. We're looking at great things from our launch of voice services and SRG acquisition that we've taken on.

"Those are going to be a full year of services in 2012; we didn't have those last year." Mr Williams said the fixed-line voice services segment was already generating between 10-12 per cent of Cable Bahamas' total revenue.

While subscriber growth in its core cable TV business was "pretty much flat" in 2011, Mr Williams said this was compensated for by improvements in its Internet and data segments.

"There's still opportunities in this business," he added. "The upside, the significant upside for us, is on the voice side, and that's where we're looking.

"2011 was a year to put certain things in place. We'll certainly be seeing the benefits of this investment that we made last year come through.

"There's still lots of opportunities in the communications side of things, and we are definitely looking at them all, I can guarantee that. Expect some great things from Cable Bahamas."