Telecoms company LIME Jamaica, a subsidiary of Cable & Wireless Communications, continues to rack up losses and see its market share evaporating.

For the quarter ended December 31, 2011, LIME Jamaica generated revenues of J$6.31 billion which produced a loss of J$1.20 billion. Particularly alarming is that it reported negative cashflow of J$62 million.

LIME Jamaica must now move quickly to cauterise the haemorrhaging and must focus upon making itself a viable entity that can entice and capture the market in all its lines of business.

War of words

More recently it has been engaged in a war of words with mobile phone service provider Digicel, contending that it is the dominant player in the local mobile phone business and that its cross-rates give it an unfair advantage.

The company’s managing director, Garfield Sinclair, is calling on Telecommmunications Minister Phillip Paulwell to expeditiously push through emergency legislation that will see interim rates set at J$5.00 a minute, until a final position is agreed on cross-network charges.

Sinclair and his team are also vociferously fighting against Digicel’s decision to acquire Claro Jamaica and so introduce an islandwide 4G network. This move, LIME Jamaica says, will in effect give Digicel a monopolistic position in the market and shut out other players.

However, LIME Jamaica must instead concentrate its energies on offering products and services that are competitive and which would see Jamaicans gravitating its way. Apple did not become the force it is by focusing on internecine battles with its competitors; rather it offered products that consumers wanted and so flocked to the company in droves.

LIME Jamaica must turn the spotlight on its own systemic problems which see its operating costs continuing to be high. In its latest reported numbers these costs have increased by 10 per cent or J$725 million.

21.5 per cent of LIME’s total revenues comes from mobile

LIME has put an inordinate amount of funds behind marketing and advertising initiatives, but this does not appear to be paying dividends as its fixed-line revenues have declined year on year (2010 vs 2011) by J$1 billion. Its mobile business does not appear to be gaining traction and in fact revenues from this business line represents just 21.5 per cent of its total revenues.

So in effect, if it received everything it wanted from the Government pertaining to portability, interconnection rates, the establishment of a single regulator and a comprehensive review of the Universal Service Obligation that ultimately would not have a major impact on LIME’s total revenues.

Digicel was able to circumvent Cable & Wireless’s monopoly by offering services and products at affordable rates. LIME Jamaica must look to do the same thing after being outgunned over the last 11 years. Digicel set its sights on per second billing and prepaid customers which proved a hit with Jamaicans. LIME must now come up with winning initiatives that give it a competitive edge.

If it is perceived as whining and unable to compete, or trying to gain ground on technicalities, it will lose even more favour with Jamaicans. The company must now double down on its financial and management issues. It is possible that it can re-emerge as a triumphant force in the telecoms sector.

Both Sinclair and chairman Chris Dehring redefined the local financial sector with Dehring, Bunting & Golding (DB&G) by being bold, innovative and thinking outside the box. They must once again find a way to push the sun back up into the sky for one more day of summer.

London must now support Jamaica

Here they will need help from their parent Cable & Wireless Communications. They cannot be left high and dry and be stymied by ultimatums. It has been reported that Cable & Wireless Communications has given the Jamaican Government three months to make changes to its telecoms regulations before it arrives at a decision as to whether to remain in Jamaica.

If this is truly the case, I believe this is a wrong approach. LIME Jamaica’s parent company did well in The Bahamas, Barbados and Macau. Rather than kick all that loot up to London it would be better served redirecting some of it to the Jamaican operation and lending a helping hand in fighting back for greater market share.

In fact, from April 1, 2006 to September 30, 2009, Cable & Wireless Communications has repatriated US$1.55 billion of cash to Cable & Wireless plc. Also, according to its financial statements for the year ended March 31, 2010, it performed well in three of its regions and reported EBITDA of US$866 million, generating strong cashflows in spite of a demerger operation.

At March 31, 2010, Cable & Wireless Communications had a Long Term Incentive Plan (LTIP) pool of US$32 million, whilst total payments made over the life of the scheme to March 31, 2010 were £18 million. On April 1, 2010, a payment was made under the scheme to participants totalling US$10 million which compares to a payment of US$3 million made in April 2009.

Cable & Wireless Communications CEO Tony Rice and his team must now get behind its Jamaican team and encourage them to take the fight to Digicel. They are two sets down in a five-set match. What is needed is gumption and the will to compete.

Cable & Wireless cannot be allowed to pull out of Jamaica

It cannot be countenanced that Cable & Wireless, with its rich history as a corporate citizen in Jamaica, can simply exit the country and leave the telecoms sector to another player. It has been an admirable friend to Jamaica, employing thousands of people.

Sinclair is reported to have said the impact of Digicel’s strategies “is worsened by the overwhelming size of the competitor’s market share, which means that the vast majority of phones in Jamaica will not make calls to the LIME network. This starves us of interconnection revenues from incoming calls, and stifles our growth”.

This is not inspired thinking. The reason Digicel got to that position is because Cable & Wireless’ service and products were woefully inadequate, and dissatisfied customers switched in droves to Digicel. Digicel did not initially start out with a competitive advantage. In fact, it was up against an entrenched monopoly. Cable & Wireless rested on its laurels and felt it had to do very little to keep its customers happy. Both the interconnection and cross-network rates have remained the same until April 2009 when Cable & Wireless lowered its rates, but it is not clear whether it passed on savings to its customers.

If the roles were reversed and LIME Jamaica was the clear market leader, it would be interesting to see whether it would be so magnanimous in lowering its rates. In fact, why didn’t it lower its rates before and indeed after the arrival of Digicel in an effort to give its customers better value?

Furthermore, LIME could have moved to acquire Claro, thereby doubling its subscriber base and positioning itself to take the fight to Digicel.

For the year 2011 LIME Jamaica’s revenue from continuing operations from external customers breaks down as follows: Mobile – J$4.47 billion; Fixed line — J$10.23 billion; Broadband, data & other — J$6 billion. This comes to total revenues of J$20.78 billion.

Generating these sums it should re-evaluate its internal processes, its cost base and strategies in an effort to compete effectively on its own terms.

Customer satisfaction and the doctrine of caveat emptor should determine who wins market share. The consumer’s right to chose one product or service over another should always be allowed to prevail.

Qui Gon is a corporate analyst at Hyperion Capital. Next week he will cast an analytical eye over Red Stripe