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Btc: ‘No Preference’ On First Mobile Rival

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company (BTC) has “no preference” as to who wins the battle to become its first mobile rival, although its post-liberalisation strategy will be determined by the winner’s identity.

Leon Williams, BTC’s chief executive, told Tribune Business that it would be “an exercise in futility” for the monopoly cellular provider to fully develop its business plan for a competitive market until the winning bidder was announced.

Likening such a move to “preparing a strategy for my shadow”, Mr Williams said he had held no discussions with BTC’s controlling shareholder, Cable & Wireless Communications (CWC), over who their preferred winner should be.

“I report to Phil Bentley [CWC’s chief executive],” the BTC chief told Tribune Business. “Phil Bentley and I have had no discussions on preference.”

Mr Williams thus effectively denied what communications industry sources had told Tribune Business, namely that BTC and CWC would prefer to have a Mobile Virtual Network Operator (MVNO) as their first competitor.

“I know Phil Bentley has said at meetings that they’d prefer an MVNO,” one source, speaking on condition of anonymity, told this newspaper.

An MVNO operator does not own/build out its own network infrastructure, but instead rents facilities and space from an existing carrier such as BTC. It effectively acts as a reseller of minutes to its subscribers over the incumbent’s network.

Such an arrangement would ensure BTC earned facilities rental and other fees from the new entrant, thus helping to compensate for any market share loss from the monopoly’s end.

And Virgin Mobile, which traditionally acts as a franchisor of its brand to national franchisees, normally operates as an MVNO.

Digicel, Cable Bahamas and Virgin Mobile (Bahamas) are the three bidders fighting for the licence to become BTC’s first mobile competitor, and end the latter’s monopoly on the most lucrative segment of the Bahamian communications market.

Mr Williams, though, indicated that BTC would wait until the Government selected the winning bidder before finalising its plans for a competitive mobile market.

“I’m not going to expose my strategy as to what I’m doing,” he replied, when asked how much BTC planned to slash its mobile rates. “We have three bidders. All three bidders are separate and apart.

“I’m not going to waste time preparing a strategy for my shadow. It’s an exercise in futility.”

The impending liberalisation has forced BTC to embark on a second workforce downsizing, so its cost structure is ‘right-sized’ prior to the anticipated loss of mobile market share and revenues.

Mr Williams, though, explained to Tribune Business that BTC’s restructuring target is a financial savings one, as opposed to a figure for the number of staff it wants to shed.

“It’s not really a number; it’s a cost,” he told this newspaper. “It’s trying to re-size the company so it can do some of the things it needs to do to prepare for liberalisation.”

Mr Williams pointed, in particular, to the pressure BTC’s new competitor will exert on cellular rates. Without the handicap of the incumbent’s existing cost structure, it will have the ability to undercut BTC on price/rates and steal market share.

BTC’s efforts to cut costs by offering staff voluntary separation packages have failed to yield the desired results, forcing the carrier to move into a termination/redundancy phase.

Cable Bahamas, in a presentation accompanying its recent $80 million preference share issue, estimated that mobile accounts for 53 per cent of the Bahamian communications market’s total gross revenues.

Pegging the mobile market as generating around $240 million in top-line revenues annually, or $20 million per month, the Cable Bahamas presentation showed that BTC could lose $70 million and $120 million, respectively, depending on whether the new entrant took a 30 per cent or 50 per cent market share.

BTC, as previously revealed by Tribune Business, has grown increasingly dependent on mobile revenues to the extent that they now account for 75 per cent of its top-line.

The damaging impact that a successful mobile competitor could have for BTC and, by extension, CWC, is therefore obvious.

The Government previously announced that it hoped to select BTC’s first mobile competitor by end-May, with the new operator launching services by October/November this year.

However, it is now mid-end April, and the Government and its Cellular Liberalisation Task Force have yet to complete the first round assessment of the three bids’ financial and technical merits.

Assuming all three pass, they then move on to the spectrum auction. This is a financial bidding process for the frequencies the new operator will use to offer mobile services to the Bahamian people, with the highest offer winning.

The process, though, has yet to even reach the spectrum auction stage, thus placing the May target date in serious jeopardy.

Several observers, speaking to Tribune Business on condition of anonymity, suggested the new operator is now unlikely to launch mobile services until 2016 at the earliest.

This, they pointed out, will effectively give CWC another year’s extension to BTC’s monopoly, taking the post-privatisation duration to five years.

BTC was initially given a three year mobile exclusivity from the April 6, 2011, privatisation date. Yet one source suggested to Tribune Business that the delays associated with launching, and completing, the liberalisation process could come close to doubling that to near six years.

“They’ve [BTC and CWC] doubled their exclusivity. It’s fantastic for them,” the source said. “As the delays continue, it gets even better for CWC. It means that the taxpayer and the Bahamian people have been hoodwinked yet again by an international telecommunications provider.”

The combined dividends and management fees that CWC has already extracted from BTC mean that it is likely to recoup the bulk of its $206 million purchase price before the mobile monopoly expires.

Comments

John 4 years, 7 months ago

While BTC continues to squander millions each year sponsoring every Bahamian event. It's vendors continue to struggle to stay in business and many have not made a profit since BTC cut it's margins on Top Up from 25% to 9%. Many have given up selling phone cards and Top Up but others continue to sell at a loss just because there is such great demand for the product. Others hold on with the hope that with the introduction of competition BTC will be forced to fix their margins. The irony of it all is that while the company claims it cannot afford to adequately compensate persons for selling their products look around and see how many million$ they continue to squander.

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vinceP 4 years, 7 months ago

A BTC / Virgin mobile arrangement is not only scary, but a obvious disaster in the making. An MVNO operator relationship, with that relationship happening with the incumbent and possible new entrant, would offer basically nothing in terms of redundancy, and in no way should the Government allow this to happen. OMG!! did we not lean anything from the network outage that BTC had last year? I would love to see what URCA has to say about this lunacy! If this kind of partnership was to happen, that would basically mean that whenever BTC experiences an outage, so would the MVNO operator. BY ALL COST, THIS MUST NOT BE ALLOWED TO HAPPEN!!!! This kind of arrangement would be fine for the second available mobile license, but NOT for the first, so in my mind, Virgin mobile should NOT get the next available license!

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DonAnthony 4 years, 7 months ago

You are absolutely right, and if virgin mobile is simply using BTC's flawed and at times overwhelmed infrastructure and is just a reseller of Btc minutes, how is this going to improve on the simply terrible service we now receive with still far too many dropped calls? If we are to advance, virgin mobile simply must not get this second license. It should go to the only 100 % Bahamian company, with most of their own state of the art infrastructure in place, one that is already 29% owned by the Bahamian people - Cable Bahamas.

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ThisIsOurs 4 years, 7 months ago

The government will own 51% share in the new company and 49% in BTC, that is competition lunacy and a guarantee that nothing will change. They need control so they can continue to pass contracts to themselves. Just look at the lunacy of the Minister with oversight for NIB

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