LIME’s Parent Says Mayday, We’ve Been Hit! Panama Sinking Under Intense Competition. Shares Tumbled 17%.

Despite 50% mobile market share and 69% of postpaid customers using mobile data, Cable & Wireless Panama is facing increased competitive intensity with the introduction of mobile number portability.

Lets Start With Jamaica

‘Shareholder’s should not be asked to pump money into a sinking hole’, Garfield Sinclair president of LIME Jamaica and the Cayman Islands said on Monday February 6, 2012 in an interview with the Financial Gleaner, as he was speaking about investing in a market with an ‘unfair’ regulatory framework. Funny he said that though, because that’s how I thought of LIME even before he said it.

LIME's Unfathomable Black Hole

The fact is, LIME Jamaica has been reporting losses and accumulating increasing debt, while eroding shareholder equity. It is losing on a lot of fronts. It is losing market share, impact, revenues and profits, all for a number of reasons, some self inflicted, others as a part of a how the industry is governed.

Now The Bigger Picture

If that were not all, its parent company, Cable & Wireless Communications on Friday made it clear that while things are stable, they are not looking good.

In its most release on Friday Feb 10, 2012, Cable and Wireless said it was raising the red flag on possible losses in Panama, its 2nd largest market in this region. A report from the Telegraph highlights this paragraph from the release;

“Our Panama business has not progressed as planned and as such we do not expect to achieve the outlook range for this business,” said Tony Rice, CWC chief executive. It now expects earnings for the second half of the year to be nearer the US$127m (£80.6m) it achieved in the first half, meaning it is likely to miss its full-year target by about $25m.

Position in Panama

Cable & Wireless Caribbean Communications 2010/2011 Revenue by Region

Based on their 2010/11 Annual report Panama is described as being responsible for 26% of Cable & Wireless Communications Plc’s revenue. They have further described their position in panama as follows;

In Panama we are a market leader in every sense, offering mobile, broadband and fixed line services. We are the major player in a significant – and growing – market with more than 2.5 million mobile customers representing more than 50% market share.

They continue;

Cable & Wireless Panama is the market leader in mobile, fixed line and broadband in this growing country of 3.5 million people. We are also a major provider of services to companies and governments. Our new pay TV service can be bundled with broadband and fixed line services, providing a triple play offer for customers.

They have described some of their achievements for 2010/11 as follows.

  • Maintained mobile market share above 50%
  • Achieved 16% market share for pay TV
  • 69% of postpaid customers now using mobile data
  • Enterprise revenue increased by 10%
  • Enterprise and social telecoms projects continue to drive growth

The Real Issue – Tense Competition in Mobile.

However Non-voice and Postpaid Segments Strong

HELP Panama!! - Cable & Wireless' sinking battleship

The real story is, despite reporting 50% mobile market share, and 69% of postpaid customers using mobile data Businessweek has reported that the company’s red flag on future  performance  is due to the ‘high level’ of competition in the mobile-phone services. They  report:

Cable & Wireless Communications (stock) sank 17 percent to 36.33 pence, the biggest drop since 2002. The company said full-year earnings before interest, taxes, depreciation, and amortization at its Panama unit will be less than its own projection. The business has been affected by the high level of competition in mobile-phone services, the company said.

Cable & Wireless Communications also said this in their release as it related to Panama:

Mobile continued to progress during the period. Mobile service revenue was higher than the same period last year driven by strong performances in non-voice and postpaid segments, and we launched a high speed mobile data network and began offering the iPhone 4S.

In the quarter we saw increased competitive intensity with the introduction of mobile number portability, which has impacted our earnings despite leaving market shares largely unchanged, and we anticipate a further earnings impact in the fourth quarter. Our Enterprise business shows further growth potential, however we are experiencing slower than expected progress in our pipeline, and we continue to face pressures on margins from revenue mix changes away from fixed voice.
As a result, we are now expecting EBITDA for the second half of the year to be similar to the $127 million of 2 EBITDA we reported in the first half, which will not achieve our previously stated outlook range for the full year of $270 – 295 million

Based on the numbers in the release we also calculated some numbers

  • 107,000 less mobile subscribers in 3 months (Sep-11 to Dec-11). However mobile subscribers have increased 41,000 greater than the previous year Dec-10
  • Broadband subscribers have fallen 5% or by 7,000 customers.
  • Fixed line subscribers have also fallen compared to the previous quarter (3,000 subscribers) and the previous year (8,000 subscribers)

Undoubtedly, Cable & Wireless Panama remains a Jewel in C&W’s crown, and with such a position and impact, they will oppose any competition vigorously. The group has also made significant gains in certain areas to position themselves for future growth. As at 31 December 2011, the net debt for the group was US$1,407 million, a decrease of $18 million since 30 September 2011.  Additionally, during the last four months, the group raised US$1 billion of financing, and currently has no significant debt maturities until October 2016.

It will be good to see the progress made when the full year results for the period ending 31 March 2012 are announced on 24 May 2012.

What do you think about Cable & Wireless’ performance and that of LIME Jamaica?

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