By NEIL HARTNELL
Tribune Business Editor
The Bahamas Telecommunications Company (BTC) has been staging “war games” to prepare for cellular competition, with its controlling shareholder engaging help from Panama and ex-Digicel executives.
Phil Bentley, Cable & Wireless Communications (CWC) chief executive, yesterday said the company was “cognisant” of the threat cellular liberalisation would pose to BTC’s status as the second largest contributor to its annual operating income.
He confirmed that BTC generated almost one-quarter of CWC’s total earnings for the 12 months to end-April 2014, and extensive resources were being devoted to prepare its Bahamian subsidiary to “fight off” mobile phone rivals whenever they emerged.
Addressing a London-based conference call with investment analysts to discuss CWC’s annual results, Mr Bentley said BTC would still enjoy a competitive advantage no new cellular player had - namely that it possesses a fixed, as well as cellular, network.
Explaining that this would give BTC a unique “convergence” offering, the CWC chief also conceded that its Bahamian asset had “not done as well as we might have” in winning the business communications market in this nation.
Still, Mr Bentley’s comments indicate CWC and BTC are far from sitting idle and waiting for a competitor to gatecrash their Bahamian monopoly.
The cellular/mobile market accounts for two-thirds of BTC’s annual top-line of around $360 million, and CWC’s top executives indicated their determination to minimise market share loss.
Mr Bentley yesterday confirmed that ex-Digicel executive, Niall Merry, who is now CWC’s chief commercial officer, had been helping assess what his former employer might do if it succeeded in winning the second Bahamian cellular licence.
And CWC’s Panama business, which has had experience as an incumbent battling new market entrants, has also been called upon to help buttress BTC’s competitive position.
“The Bahamas is 24 per cent of this year’s EBITDA (earnings before interest, taxation, depreciation and amortisation),” Mr Bentley said.
“It’s the second largest country contributor to EBITDA, and it’s a monopoly market, so we’ve got to get ready for competition.”
Responding to an analyst’s question on BTC’s profit contribution to CWC, and how quickly this might be eroded by cellular competition, Mr Bentley added: “We’ve had the team in, and certainly Niall [Merry] has been helping in war gaming what we think Digicel might do if they come in.
“We’ve had the Panama team helping us, because they’ve gone through pretty intensive new entrance strategies in how to fight those off.”
Mr Bentley emphasised that cellular was just one of BTC’s three business segments, the other two being fixed-line voice and broadband Internet.
“We’re looking to try to grow our broadband business, and have been putting in a Next Generation Network,” he added.
“It’s all part of this fixed-mobile convergence play, so we’ll be able to move to that wi-fi offload for products that a mobile-only entrant will be unable to support.”
Mr Bentley’s judgment, though, could be subject to reappraisal if Cable Bahamas wins the battle for the second cellular licence, as the BISX-listed provider has a fibre optic infrastructure that already offers fixed-line and broadband Internet products.
Not wishing to be drawn on the competitor BTC might ultimately face, the CWC chief alluded to the continuing uncertainty surrounding the process for awarding a second cellular licence and the timing.
“We don’t know who the competitor is, we don’t know when they are coming into the market, and what they’re going to do in terms of pricing,” Mr Bentley said.
“Rather than speculate, we’ve got to be cognisant there’s a risk there and to be focused on managing it.”
The Government has said little about cellular liberalisation, the door for which has now opened following the April 6, 2014, expiry of BTC’s three-year post-privatisation monopoly.
Prime Minister Perry Christie recently said a committee, headed by former financial secretary Ruth Millar, had been established to determine the timing and method of cellular liberalisation.
Most persons are expecting the Government to employ an auction process to determine the licence award, with rival players bidding against each other, in order to both maximise the price and get the best deal for the Bahamian consumer.
How transparent and open such a process is remains to be seen, but the potential players are already starting to gather in anticipation of entering the lucrative Bahamian cellular market.
Apart from Cable Bahamas and Digicel, the other interested parties include Limitless Mobile (which is preparing by taking a majority stake in Bahamian communications provider, IP Solutions International), plus the likes of Virgin Mobile and Vodafone.
Given the current timescale, it appears unlikely that a second cellular licence will be awarded until 2015 at the earliest. With the winner likely to need a year to build-out and test its network, Cable Bahamas’s estimate that competition will not arrive until 2016 or 2017 looks increasingly accurate.
Mr Bentley, meanwhile, admitted that BTC still had “upside” potential in providing communications services, or business to business services (B2B), to the Bahamian private sector.
“It’s probably fair to say we’ve not done as well as we might have done in winning B2B business. So there’s upside there,” he said.