LIME sets three-month deadline

Paulwell plans drastic changes to mobile rules

CAMILO THAME Business Co-ordinator thamec@jamaicaobserver.com

Wednesday, February 15, 2012

CABLE & Wireless, the parent of LIME, has given the Government three months to sort out the regulatory environment before it has to “make a decision” on its future here.

Telecommunications minister Phillip Paulwell said he believes he will be able to drastically change the rules, which LIME believes put it at a disadvantage, within that time frame.

LIME, which has been losing money since 2007, could see its capital base wiped out in another six months if nothing changes.

Speaking yesterday on Nationwide 90FM’s daybreak news and current affairs programme This Morning, Paulwell told hosts Emily Crooks and Naomi Francis that “two weeks ago when we met (with Cable and Wireless) they gave us three months to try to sort this thing out”.

It wasn’t an ultimatum that was given, but rather Cable & Wireless defining “some time constraints by which they believe these situation in Jamaica ought to be, in their view, remedied”, he said.

When pressed, he added that the three months would be up “sometime in May”, when “they (C&W) will be at a point when they will have to make a decision”.

LIME Jamaica reported a $1.2-billion net loss for the three months to December 31, 2011, which was lower than the $1.3-billion loss incurred during the comparative period a year before.

However, losses for the nine months to December 31, 2011, stood at $3.8 billion compared to $2.4 billion for the same period a year earlier. Its accumulated net loss between April 2007 and December 2011 stands at over $17 billion.

What’s more, LIME Jamaica’s capital base stood at $2 billion at the end of 2011, which means that it could hardly withstand more losses over the next six months.

It still has access to a $30-billion uncommitted revolving facility with Cable & Wireless Finance (Cayman) Limited, through which LIME Jamaica increased its liabilities to the group from $17.7 billion last March to $23.1 billion at the end of 2011.

LIME Jamaica’s parent, Cable & Wireless Communications (CWC) said in the UK on Friday that it expects “a significant non-cash write-down of our carrying value of (its Jamaican) asset as part of our full-year results”, due to its difficult market position and a lack of regulatory reform that would enable it to operate profitably.

CWC’s Lachlan Johnston told the Business Observer that the company was “working to assess the level of write-down ahead of our full-year results, but at this stage we cannot give any figures”.

He added that the write-down would purely be an accounting charge to CWC’s financial statements, as part of a requirement under international accounting rules.

“As we have said before, the conditions in Jamaica are very difficult. We are competing against a company which has an unfair advantage in terms of regulation,” he said. “Our short, medium and long-term prospects are dependent on there being a change to the regulations, which the Jamaican Government is now considering.”

LIME Jamaica’s managing director, Gary Sin

clair, said he couldn’t respond to most of the questions posed by the Business Observer, as they “relate directly to matters of great commercial sensitivity”.

“Suffice it to say that our best minds are concentrated on looking at our business and options as we seek to follow through on our commitment to providing world-class service to Jamaican businesses and consumers alike,” he said.

“Only LIME’s fixed network is regulated in Jamaica,” said Sinclair, adding that LIME’s competitor “is able to use ... strategies that incentivise its customers not to call LIME customers”.

“The impact of these 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.”

The main regulatory issue that LIME hopes will change in the immediate future is the rate which its main competitor — Digicel — charges to terminate on its network.

Paulwell, in his interview on Nationwide, said under new regulations the Office of Utilities Regulations (OUR) would be empowered to set the rates.

In a late evening press statement yesterday, LIME said it believes that “the OUR, which falls under the remit of the Office Of the Prime Minister, is ideally placed to recommend any interim rates for the industry”.

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LIME sets three-month deadline