The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas executives yesterday said the company could “do in three years what it has achieved in 20” as a result of winning the battle to be this nation’s second mobile provider, a success that could create up to 150 jobs.

David Burrows, the BISX-listed communications provider’s marketing vice-president, told Tribune Business that it would pursue its new mobile opportunity “with the same zeal” it had employed in the cable TV, Internet and fixed-line markets.

With Cable Bahamas likely to add between 100-150 jobs for its new mobile service, Mr Burrows revealed that the company planned to follow the likes of Atlantis and Baha Mar in creating its own ‘university’ or training school - the ‘REVUniversity’.

He added that “there is only upside for the Bahamas” as a result of the second mobile licence going to a 100 per cent locally-owned company - something that would benefit its 2,400 shareholders, as well as consumer.

The Cable Bahamas marketing chief emphasised, though, that “a lot of work” remains to be done before the mobile licence becomes a reality.

Mr Burrows said it had a “laser-like focus” on the next stage of the process, which involves the formalising of its relationship with ‘HoldingCo’ - the entity that will hold the majority 51 per cent stake in the new mobile operator on behalf of the Bahamian people.

Until that and other conditions are fulfilled, including the establishment of ‘NewCo’, the actual mobile operator, Cable Bahamas will not be licensed as the first competitor to the Bahamas Telecommunications Company (BTC) in the most lucrative segment of the Bahamian communications market.

Nevertheless, there was little disguising Cable Bahamas’ elation at having taken another significant step towards securing the last major domestic growth opportunity.

Mr Burrows told Tribune Business that Cable Bahamas’ three existing business segments had reached a “stage of maturity” where, barring an economic or population explosion, organic growth would prove hard to come by.

He also confirmed that uncertainty over the timing of, and access to, mobile liberalisation in the Bahamas had prompted Cable Bahamas to seek out growth opportunities abroad via its $100 million expansion into the Florida communications market.

“We’ve been very successful in this market,” Mr Burrows said, “growing from nothing in 1995 to a $112-$113 million company. We could end up as high as $115 million [revenues] by the end of the year.

Those figures relate to Cable Bahamas’ Bahamian operations only, and Mr Burrows added: “The reason we ended up going to Florida was that we were not sure when this [mobile liberalisation] would happen.

“We had reached a stage of maturity with Internet. We have 67 per cent of the market there, and with the cable TV we have a good 75 per cent of the market.

“When you reach saturation point, you need other areas of growth. We have the opportunity to do now, in three years, what we did in 20 years.”

That is a reference to the fact that, based on BTC’s monopoly revenues, mobile is the most lucrative market segment, generating between $240 million to $250 million annually for the incumbent.

Given its TV and Internet dominance, and BTC’s majority fixed-line voice share, mobile represents the fastest-growing opportunity for Cable Bahamas in what will be a ‘quadruple play’ proposition.

Mr Burrows said new entrants typically seized between 40-60 per cent market share, based on what had happened when other countries liberalised their mobile/cellular markets.

“When Cable Bahamas goes into a market, it likes to get all of it. We hope to do better than most markets,” he told Tribune Business.

“We will obviously go after this market with the same zeal as we have gone after the Internet market, the TV market and the fixed-voice market.”

Mr Burrows said Cable Bahamas’ existing fibre-optic communications infrastructure left it well-placed to meet the demands of a mobile market that is increasingly being driven by data.

“Cable Bahamas is so well-poised because we have such a strong position in Internet,” he added. “It’s more and more about data. That’s one of the things that stands out for Cable Bahamas in terms of the fact that, wherever you’re going, that network we have in place will be able to deliver that data.”

He added that the company’s existing infrastructure was “a tremendous asset” for “the mammoth task” of meeting the Government’s tight network roll-out targets.

Cable Bahamas’ existing network infrastructure was seen by many observers as giving it a distinct advantage over its last two competitors, Digicel (which dropped out before the spectrum auction) and Virgin Mobile (Bahamas).

These two would have had to build their networks from scratch, requiring considerably more investment than Cable Bahamas’ likely outlay - something that experts believe helped the BISX-listed provider to outbid Virgin Mobile in the auction.

Several sources have suggested, though Tribune Business has been unable to confirm, that Virgin Mobile (Bahamas) decided to discontinue bidding when the spectrum auctions price went beyond $60 million because neither itself - nor its financial backers - could see any way they could earn a profit and investment return beyond this level.

Cable Bahamas ultimately bid $62.5 million for the wireless spectrum that ‘NewCo’ will employ to run its network, with its combined score from the initial technical/financial evaluation also exceeding Virgin Mobile’s total score.

Mr Burrows, meanwhile, confirmed that Cable Bahamas “anticipates” hiring more than 100 employees for the new mobile venture - a number that could rise to 150 and “maybe more”.

“We’re just around 500 employees. We’ll end up with between 600-700 employees at the end of the day,” he added.

Mr Burrows revealed that the company would soon announce the launch of its REVUniversity training school, making it the third Bahamian company behind Atlantis and Baha Mar to introduce such an initiative.

“On the consumer side, we will be able to provide better service, better coverage and better pricing,” he told Tribune Business. “There’s no doubt in our minds those are the cornerstones of what we’re going to deliver. It’s our mandate.

“We know networks, we know service delivery, and we’re now in multiple markets; not just in the Bahamas.

“We extend around the state of Florida. We’re in front of 18 million people and we already provide backhaul to one of the largest mobile companies in the US. That’s something we already have expertise in.”

Mr Burrows said the lower pricing would likely adjust the mobile market’s current $240-$250 million revenues “down slightly”, and he predicted that BTC would provide “stiff competition all the way”.

The speed with which Cable Bahamas’ licence is affirmed, and awarded, not to mention how rapidly it launches services, will depend to a great extent to how fast the Government and its Cellular Liberalisation Task Force moves.

The next move has to come from them, and their advisers at PricewaterhouseCoopers (PwC), as they both have to find the investors for - and formally structure and set up - ‘HoldingCo’.

Until that occurs, and the latter’s Board of Directors are appointed, it will be impossible for Cable Bahamas (and NewCo) to establish and formalise the relationship with ‘HoldingCo.

Mr Burrows told Tribune Business that Cable Bahamas had taken the mobile liberalisation process “stage by stage”, and was now “laser focused” on meeting the remaining conditions set by the Task Force, and the relationship with HoldingCo, so that the licence could be issued.

He added that until the relationship with HoldingCo was completed, financial, market share and performance projections for the new business, plus products/services, bundling and the network roll-out could not be fully determined.

The Task Force anticipates that the licence will be issued by year-end, meaning that NewCo (operated and 49 per cent owned by Cable Bahamas) should start delivering services to Bahamian consumers by mid-2016.

But establishing the Shareholders Agreement and other aspects of the relationship between NewCo and HoldingCo may not necessarily be the easiest of tasks.

While Cable Bahamas will have Board and management control over NewCo, plus “strategic policy-making” power, HoldingCo will have “certain veto rights” that are as yet undefined.

And the original Request for Proposal (RFP) seemed to make HoldingCo’s creation more cumbersome by offering the Government as the initial “sole shareholder” of NewCo if this will help facilitate the share transfer to private investors.

“In order to facilitate the timely formation of NewCo and commencement of operations, the Government’s primary role will be to facilitate the immediate transfer of shares to Bahamian private investors at the time that HoldingCo is formed,” the RFP said.

“However, the Government’s shareholding in HoldingCo would only be temporary in nature, pending an offering of the shares in HoldingCo to eligible investors.”

Few private sector companies would want the Government as fellow shareholder, especially one that wants to move as quickly as Cable Bahamas does, especially given the mobile network roll-out timetable.

Much will likely depend on who sits on HoldingCo’s original Board of Directors, and how the Task Force approaches talks with Cable Bahamas.

HoldingCo’s relationship with NewCo appears designed to mirror that of BISX-listed ICD Utilities’ arrangement with Grand Bahama Power Company. Here, the former acts as a holding company/investment vehicle for a 50 per cent stake in the electricity utility.

The original RFP also stipulated that Cable Bahamas, not the 51 per cent Bahamian shareholders in HoldingCo, will be responsible for posting performance bonds of between $500,000 to $4 million for each stage of the network roll-out.

And while Cable Bahamas and HoldingCo will be responsible for start-up and initial capital costs in proportion to their shareholdings, the two sides will have to agree “projected capital injections” for each roll-out phase prior to the licences being issued.

The two sides will then finance these in proportion to their shareholdings, but the Bahamian investors in HoldingCo will have to agree to finance this via debt.

Much, then, depends on the Government and Task Force to both consummate Cable Bahamas’ licence win and the speed with which mobile competition finally arrives.