British telecommunications giant Cable & Wireless Communications (C&WC), the parent company of LIME (Jamaica) is experiencing a degree of turbulence as its operations around the globe continue to register mixed fortunes.

Last week, C&WC dropped 17 per cent on the FTSE 100 Index and the company issued a profit warning. A vexing problem appears to be the performance of its operations in Panama.

Commenting on this matter, C&WC’s CEO Tony Rice said in Britain’s The Telegraph newspaper: “Our Panama business has not progressed as planned, and as such, we do not expect to achieve the outlook range for this business.”

The company said its business there was facing increased competition and falling demand from corporate clients. Its earnings in Panama is expected to come in at around US$250 million instead of the anticipated figure of somewhere between US$270 million and US$295 million.

The company said it was hurt by number portability, launched in Panama in November of last year.

Rory Stokes at Liberum Capital pointed to the company’s “paltry cash flow, daunting net debt position and precarious dividend”, and maintained a “sell” rating.

The Guardian reports Stokes as saying: “A recent refinancing has brought breathing space, but the very low cash-flow generation of this business and the structural pressures it faces makes the net debt position look daunting and the dividend precarious.”

With one of the region’s highest GDP growth forecast for 2011/12, the outlook is promising for Panama’s telecom market. The GDP per capita is the highest in Central America and is among the five fastest-growing countries in Latin America. Last year, telecom revenues were expected to exceed US$1.5 billion, with mobile services and broadband being the fastest-growing sectors. The mobile sector there has penetration well above the 100 per cent mark and about 30 per cent higher than the regional average.

The Bahamas and Macau

It is not all bad news for Cable & Wireless Communications. It continues to do very well in both Bahamas and Macau.

In the Bahamas, C&WC expects its earnings to exceed its previously stated outlook range of US$60- $80 million. A C&WC statement on the Bahamas reads: “The Bahamas continued to progress strongly in the period. In December, we opened our refurbished flagship store in Nassau and launched our high-speed mobile data network. Bahamians only had access to ‘second generation’ (2G) mobile services.”

In Macau, C&WC expects to exceed its forecast of earnings of between US$150-$160 million. It is of the view that the buoyant Macanese economy has helped maintain a healthy level of enterprise revenues.

Jamaica

The situation in Jamaica continues to be a trying one as the economy there manifests lacklustre growth and Digicel continues to dominate the mobile sector relegating LIME to being a bit player.

According to its Group Income Statement for the quarter ended December 31, 2011, Cable & Wireless Jamaica generated total revenues of 6.31 billion, which produced a loss of 1.205 billion. Operating expenses of 2.93 billion were marginally better than the corresponding period for the same quarter last year.

International fixed voice revenue increased by 30 per cent as a result of more inbound traffic and enterprise and data solutions, which increased by five per cent reflecting a large growth in sales in the corporate market.

National fixed voice, mobile and broadband saw declines in revenue of 11 per cent, two per cent and 10 per cent respectively, principally as a result of usage levels reducing. Despite the increase in revenues, prepaid subscribers reduced by 31 per cent due to the discontinuation of expensive prepaid promotions, albeit with a resulting increase in ARPUs.

Commenting on this performance, Managing Director Garfield Sinclair said: “Among encouraging signs is the fact that revenue and EBITDA improved over the same quarter in the prior year, resulting from a robust performance from our fixed voice international business and an 8 per cent increase in our mobile gross margin. Our focused subscriber retention activities yielded positive results with churn falling across all lines of business.”

LIME Jamaica continues to struggle in successive quarters and this is well documented. The company is now engaged in advocating for a better and more equitable regulatory environment. However, chairman Chris Dehring and his team must be given time to implement and effect a long-term strategy to grow the company into a better competitive position and commendable profitability.

Every quarter that comes out showing losses of over $1 billion puts it under pressure and forces the management team to garner results from short-term solutions. Its parent in London have to give it time and the space to craft and work a plan.

Only last month, journalist Cliff Hughes reported that LIME may well be pulling out of Jamaica. Chris Dehring vehemently denies this and the company later issued a release that read: “Cable & Wireless Limited has advised that media reports that the parent company of Cable & Wireless Jamaica Limited, trading as LIME, has taken a decision to pull out of Jamaica, are incorrect.”

This sort of thing has the company spending an inordinate amount of time defending itself and fighting a rear guard battle rather than executing its strategy. London must assure the team in Jamaica that it has the time and resources to stay in the game.

Already the signs are encouraging.

* Increased postpaid mobile subscriber base is up by five per cent

* Increased ARPUs across all lines of businesses with mobile prepaid voice and data ARPUs increasing by 38 per cent and 100 per cent respectively

* Increased subscriber retention in all lines of business

* EBITDA improved to $755 million from 501 million from loss of 254 million in the prior year.

C&WC concedes that it has problems in Jamaica and planned to write down the value of that business in its full-year figures.

“In Jamaica, our market position remained difficult and we continue to experience poor financial performance despite the growing demand for mobile data services,” said Cable& Wireless on its situation in Jamaica. LIME Jamaica is reported to have around 350,000 mobile subscribers.

Barbados

In Barbados, where Cable & Wireless does very well, its workers are threatening to go on strike in an effort to wrest a pay increase from the company. The government is attempting to quell matters and oversee an amicable solution.

LIME has around 600 workers in Barbados and the Barbados Workers’ Union (BWU) is pushing for a 17 per cent salary increase whereas LIME wants to settle at seven per cent.

As in Jamaica, interconnection has been a controversial issue with LIME being accused of inhibiting competition and new entrants generally dissatisfied with termination rates and policy issues related to new service opportunities. Some termination rates remained unchanged for up to six years.

In 2008, Barbados’s Fair Trading Commission (FTC) asked Cable &Wireless to devise a consolidated reference interconnection offer and not separate arrangements for mobile, international and domestic rates as existed then. It was at that point that the other telecom players voiced concerns about the rates charged by Cable & Wireless.

As at March 31, 2011, LIME had 1,287,000 mobile customers, 617,000 fixed-line customers and 208,000 broadband customers in the Caribbean.

In mobile, LIME is the market leader in 10 of the markets in which it trades. It is the market leader in all fixed-line markets across its Caribbean business.

It is also the market leader in broadband in each of the markets in the Caribbean, apart from the Bahamas.

Cable & Wireless Communications wholly owns eight of the businesses it operates in the Caribbean, and owns a further six businesses in partnership with the local government.