Business

LIME squeezed further by recession

Wednesday, February 17, 2010

LIME Jamaica incurred a $351-million net loss for the three months to December 31, 2009 compared to a $33-million net profit in the comparative quarter in 2008, as costs associated with financing, depreciation and amortisation increased 70 per cent.

During the quarter, the telecom managed to keep its other operating expenses at $2.5 billion -- the same as the comparative period in 2008 -- and even improved its gross margin from $3.9 billion in the corresponding three months in 2008 to just over $4 billion in the review quarter.

Depreciation and amortisation charges for the quarter, however, were $1.3 billion compared with $764 million for the comparative period in 2008, while net finance costs increased by $152 million over the December 2008 quarter, primarily as a result of the increased interest costs of $329 million, which was 76 per cent higher than the comparative quarter in 2008 and which was higher due to additional borrowing from the parent company to fund network development and expansion as well as increased interest rates over the period.

Additional depreciation and obsolescence charges of $486 million were recognised in the quarter as a "result of changes in useful economic lives for the asset base ...and to reflect the continuing transformation of the core networks".

LIME blamed the recession and anti-competitive practices for the negative results but maintained that it still increased certain segments of its business.

"Despite the challenging economic climate we continued to grow Internet and data revenues and maintained market share on mobile," stated LIME in statements accompanying the results. "Our fixed line revenues continue to be impacted by anti-competitive practices..."

Even without its 3G wireless build-out and restructuring costs LIME's operating profit declined 60.7 per cent from $637.7 million to $250 million over previous year's quarter.

Operating profit of $230 million for the quarter compared with $551 million for the same period in 2008. LIME said that it was "mainly as a result of the additional depreciation charges of $486m made in the current quarter, partially offset by a decrease in restructuring costs".

The net loss attributable to stockholders for the nine months to December 31, 2009 was $2.2 billion compared with a net loss of $233m for the same period in 2008 as a result of the additional depreciation charge, the increased finance costs and the 12 per cent depreciation of the Jamaica dollar against the US dollar.

This has yielded a loss per stock unit of 13.02 cents compared with a loss of 1.39 cents for the corresponding period in the previous year.

Yesterday the stock price languished at 38 cents from a 52 week high of 48 cents.

LIME's parent, Cable and Wireless (C&W) plc's board this month disclosed that the Caribbean continued to be challenging market.

"Whilst we are holding market share, lower usage by customers and more aggressive price promotions means that revenue and EBITDA continue to trend in line with the first half of 2009/10," said a release made by the British telecom last month. "We believe that the market conditions within the Caribbean region will remain difficult through the remainder of this year and into next."

It stated that other territories such as Panama, Macau and Monaco have seen improvement.

The rest of the group's operations is expected to make EBITDA of approximately £430 million during the current financial year, which ends March 31. C&W plc, this month sought court and shareholder approval for a demerger that will see the group split in two segments. C&W hopes to get approval from shareholders and the court on February 25, 2010 for the demerger, which will result in separate public listings for Cable & Wireless Worldwide plc ("Worldwide") and Cable & Wireless Communications Plc ("Communications"), the new name for Cable & Wireless International (CWI).

The demerger is expected to be completed and trading to start in the shares of the two companies by the end of March 2010.

Over the years, C&W's operations outside of Britain have represented the telecom's profit centres. At the end of the demerger, Cable & Wireless Communications Plc will be chaired by Sir Richard Lapthorne, who is the current chairman of C&W PLC, the existing CEO and CFO of C&W International -- Tony Rice and Tim Pennington -- will keep their roles in C&W Communication.

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