Integrated telecommunications service provider Cable & Wireless Jamaica, now operating under the brand name LIME, posted a $1.3 billion loss for the quarter ended September 30, 2009. However, there were some bright highlights with the company reporting growth in its Internet and data business arms.

Falling revenues and profits

According to its unaudited consolidated financial statements, LIME Jamaica saw its revenues drop to $5.1 billion for the quarter under review. For the corresponding period in 2008, it posted revenues of $5.5 billion, thus spelling a 10 per cent decline this year. Over the six-month period revenues came to $10.4 billion, some $800 million less than the $11.2 billion posted for the corresponding period last year.

Total cost of sales for the quarter under review fell to $1.78 billion from $1.91 billion last year. This translated for the six-month period to $3.5 billion, $300 million less than the $3.8 billion posted last year. Gross margin declined by 12 per cent to $3.22 billion compared with $3.65 for the same period last year, driven by the reduction in revenue. Gross margin as a percentage of revenue remained flat.

LIME Jamaica posted a net loss attributable to stockholders of $1.33 billion for the quarter compared with just $238 million for the same period last year. The six-month period was no less grim. Here it lost $1.83 billion compared with $265.8 million for the same period in 2008, highlighting just how woeful its profit performance was for the quarter under review. This translated to a loss per stock unit of 7.94 cents compared to just 1.42 cents for the same quarter in the previous year.

For the six-month period, LIME Jamaica yielded a loss per stock unit of 10.93 cents compared with a loss of 1.58 cents for the same period in the previous year. LIME Jamaica attributes this performance mainly to the depreciation of the Jamaican dollar and increased financial costs.

Containing operating expenses

Among the bad tidings there was some good news. Although depreciation and amortisation came to a whopping $2 billion from $786.6 million in the previous year, LIME managed to reduce administrative, marketing and selling expenses from $1.9 billion for the same quarter last year to $1.5 billion for the quarter under review. During the course of this year the company has laid off workers in an effort to reduce escalating costs. The group successfully managed to reduce its Jamaica dollar-based costs, including property costs, despite increases in foreign currency-based expenses, including network and IT costs.

Net finance costs increased by $527 million over the September 2008 quarter due primarily to an increase of $409 million in interest expenses resulting from the increased borrowings from the parent company to fund network development and expansion.

Encouraging signs

LIME Jamaica is reporting that it has grown Internet and data revenues and maintained market share on mobile, thus not losing ground to its main competitor Digicel. It is seeing increased demand for its business solutions from a number of companies as the market moves to a more IP-based service. The launch of its 3G service has gone well, exceeding its first 100 days sales targets.

Of particular note is the announcement that the company has grown the subscriber numbers for mobile broadband and ADSL. Its 8mbps ADSL package has proven to be a hit. Its World Pack plan, aimed at the mobile international calling market, is gaining traction. The rebranding as LIME has been deemed a success as the company goes after a more youthful target market.

The company has spent $670 million this financial year to expand its mobile network and further improve coverage across the island. Last year, it spent in excess of $3 billion on its mobile network. The expansion programme includes the commissioning of 70 new cell sites across Jamaica’s 12 rural parishes. The new sites are earmarked to become operational on a phased basis between October 2009 and March 2010. The build-out is being expedited by a tower-sharing agreement brokered with Claro in July this year.

Demerging operations

LIME’s parent company, Cable & Wireless Plc, earlier this month announced that its international operations, which include Jamaica, will not be sold following its decision to separate into two companies in order to increase shareholder value. This serves to scotch speculation that Cable & Wireless will sell if courted by the Carlos Slim-owned America Movil, a move that would give America Movil a bigger footprint in the Caribbean and the Jamaican markets.

“We are not selling the International Division,” said Lachlan Johnston, Cable & Wireless Plc’s director of public relations, in an interview with Caribbean Business Report earlier this month. “All that is happening is that the two operating segments of our business are being separated in the demerger.”

The group’s worldwide and international divisions will be split and relisted on international exchanges. Johnston made it clear that services provided to Caribbean customers will remain unchanged.

Cable & Wireless Plc saw a 44 per cent increase in its profits at £120 million for the six months ended September 30, 2009, but the lion’s share of this profit came from the International Division, with the Worldwide Division registering a £26 million loss.

LIME recently announced the appointment of Chis Dehring, first as chief marketing officer for the region and then as chairman of the Jamaican operations. He is expected to lead the resurgence of the company’s Jamaican business and the rest of the Caribbean.