4 takeaways from Cable & Wireless’ recent performance review

Four key takeaways are highlighted based on the press release issued on Cable & Wireless Communications’’ performance in 2014/2015.
Last week, Cable & Wireless Communications plc (CWC), the parent company for the brand, LIME, which operates in the Caribbean, and the new owner of Columbus International, which operates the brand, Flow, among others in the region, reported on its performance over the 2014/2015 financial year. In summary, the company’s performance has been improving over the past few years, with the recently concluded reporting period being one of its strongest:

Group revenue of US$1.8 billion up 4% reflecting strategic progress

Group EBITDA of US$585 million up 7%; EBITDA margin increased by 1 ppt to 33%

US$100 million cost reduction plan successfully completed; c.800 FTE reductions over two years

US$442 million Project Marlin capex investments have improved network performance

Significant growth in adjusted EPS to US4.7 cents driven by US$55 million lower interest cost

Columbus acquisition completed on 31 March 2015; integration underway…

(Source: CWC)

The press release, which is quite detailed, includes a summary of the firm’s financial statements, along with some insight into its future plans. In this article we highlight four key conclusions drawn from the 2014/2015 performance review.

1. CWC is heavily invested in the Caribbean

For those who may not be in the know, CWC evolved out of companies established in the mid-1800s. At its peak, it had telecoms operations in over 50 countries worldwide, in areas such as the United Kingdom, Asia and the Caribbean. Over the past 15—20 years, in particular, the firm has been divesting most of those operations, and currently only retains a presence in 16 Caribbean countries, and in the Seychelles (Source: CWC).

It therefore goes without saying that most of CWC’s business – the source of its revenues and profits – is the Caribbean. Hence, outside of the Seychelles, there ought to be little to dilute its attention (and resources) from its business in the region, and to achieve the goals it has established.

2. Quad-play is the strategic focus

Over the past three years, and it was again highlighted in the year-end report released last week, CWC’s focus has been shifting from voice, especially mobile/cellular communications. In its press release at the end of the 2012/2013 financial year, the firm clearly set out its strategic imperatives, which still appear to be guiding it two years later:

mobile leadership – deliver the best handset range, network, data packages and customer service;

fixed-mobile convergence – leverage our unique combination of fixed and mobile assets;

reinforce our TV offering – generating TV and broadband growth whilst reducing fixed line churn; and

grow our business services – bespoke, customer-centric solutions leveraging our on-land and sub-sea assets.

(Source: CWC)

Hence, although voice is not being abandoned, and with its recent acquisition of Columbus International Limited, CWC wants to be seen as the leading quad-play operator in the region: fixed-line, mobile/cellular, Internet, and subscriber/cable TV services.

In the press release reporting in the 2014/2015 financial year, CWC Chief Executive Officer, Phil Bentley, recognised that the company is uniquely positioned to be a truly full service provider:

We have made good progress in executing our strategy and we are beginning to uncover the full potential of our business. CWC is on the way to becoming a better company – a genuine quad play operator, with strong market shares in the geographically focused and attractive Caribbean and Latin American markets. We see good long-term growth prospects across Consumer, Business Solutions, and Networks businesses, underpinned by our differentiated submarine and terrestrial fibre networks and full service offering…

(Source: CWC)

3. Columbus/Flow is a critical component to realise strategic goals

In the Caribbean countries in which CWC has a presence, generally it offers fixed-line, mobile/cellular and Internet services, and in a select few, such as Saint Lucia, it is also subscriber/cable TV service provider. However, depending on the country, and as highlighted in our Snapshots of Internet speed and spend across the region, CWC’s Internet service may not necessarily be the best, in terms of speed and spend (for example), if there is competition in that market. Hence, the purchase of Columbus International, which includes the brands Flow, Columbus Business Solutions and Columbus Networks, would help CWC not only to raise its game on the Internet and subscriber/cable TV fronts, but also gives it ownership of, or at the very least a stake in, over 42,000 km of submarine cables and connectivity into 42 countries.

Further, as a smaller and privately-owned business, Columbus International was able to be more dynamic and agile than CWC in the region. Hence in having some of the Columbus principals on its board – as a result of the sale – CWC is also hoping that this infusion will help change its organisational culture to become more pioneering and competitive.

4. A focus on efficiency and costs containment will continue into the future

Over at least the past five years, CWC has been keen to lower its operating costs, which has resulted in a variety of restructuring initiatives in individual countries and regionally. Based on its plans over the next three years cost containment will continue to be a critical imperative. It therefore ought not to be a surprise that with the anticipated merger of the LIME and Flow businesses in the countries in which both have a presence, job loss and other outcomes from restructuring, are likely to eventuate. Additionally, CWC plans to divest itself of stake in TSTT and continue to position its Bahamas operations (Bahamas Telecommunications Company) for competition in the mobile/cellular space.

Having said this, it is important to highlight that in order to realise the strategic imperatives highlighted earlier, CWC must also be prepared to spend money. In many countries across the region the firm has been accused of neglecting its fixed-line infrastructure and so considerable remediation and upgrades may be needed. To that end, the firm established “Project Marlin” in 2013/2014 to provide “targeted capital investments, across our fixed and mobile networks” (Source: CWC). In the 2014/2015, USD 442 million, of the USD 1 billion allocated, has been spent through Project Marlin.

 

In summary, and to some degree, CWC has a relatively clear idea of its own potential – to move from where it is, to where it wants to be. However, the ability to execute successfully – to be strategic, dynamic and agile – is critical. Hence, it will be interesting to see in the coming months and years how CWC, along with whether or not, or the extent to which, it actually realises the goals envisaged.

 

Image credit:   (Master isolated images (FreeDigitalPhotos.net)

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