CWC cuts 560 Staff, 340 more jobs to go by March
Cable and Wireless Communications Plc (CWC) cut 560 employees, or about seven per cent of its staff, over the six months to September.
The telecoms, which is currently merging with Columbus International, expects to reduce its headcount by a further 340, or five per cent, by next March.
It says the staff cuts are the underpinning factor in it realising US$70 million in cost savings on a run-rate basis by the end of its current financial year.
Overall, the merger was initially expected to provide US$85 million in annual cost savings within three years, but that figure was increased by 47 per cent to US$125 million during the first half of the current financial year.
Management realised it could make sharper cuts in the headcount in back office, sales and marketing, and customer service roles through closure of several administrative and retail locations.
Last November, when the US$3-billion buyout of Columbus was announced, CWC said that it expected to realise US$50 million cost synergies from staff cuts, renegotiation of vendor rates and reduction of real estate costs and harmonisation of IT systems.
Now, it figures that headcount reduction alone will save it US$45 million annually. A further US$29 million is expected from network and system consolidation.
On the other hand, the telecoms has opted to bring some of its field operations and customer service back in-house.
Cancelling legacy CWC contracts with external providers for network maintenance and in-sourcing certain other activities are expected to yield US$18 million in savings annually.
CWC's group revenue totalled US$1.2 billion for the six months to September 30, reflecting an increase of four per cent over year-earlier levels.
Consequently, earnings before interest, tax, depreciation and amortisation (EBITDA) rose by four per cent to US$427 million.
EBITDA growth was driven largely by the Caribbean, where profit grew by 22 per cent. EBITDA in the Caribbean represented 39 per cent of sales within that region, compared with a ratio of 36 per cent of sales across the group.
Jamaica currently lags behind the rest of CWC's markets in terms of profitability. Flow Jamaica, which still trades on the Jamaica Stock Exchange as LIME, hasn't yet released its second-quarter results, but it reported an EBITDA-to-sales ratio of 25 per cent in its first quarter. That was an improvement from 16 per cent a year earlier.
CWC chief executive Phil Bentley expects that the addition of subscriber television offering and customer growth will lead to margins in Jamaica climbing higher than 30 per cent this financial year.
"We made great inroads in terms of mobile penetration," said John Reid, former president of Columbus Communications and recently appointed president of CWC's Consumer Group. "We will see the natural progression from 2G to 3G (which provides mobile broadband data offering). It (Jamaica) is still a heavy 2G market in terms of disposable income."
The telecoms reported that its mobile subscriber base grew by 186,000 over the year to September 2015, primarily due to an increase in prepaid subscriptions in Jamaica. It also reported that mobile data traffic increased by 241 per cent in that market.
From integration activities, CWC achieved US$25 million in total net run-rate cost savings in the first half of its current financial year. The telecoms expects to realise an additional US$45 million in annual cost savings by next March.
Long before then, shareholders of the company will know if Liberty Global will be purchasing all the shares in CWC.
Last month, the two companies announced that they were in talks on a buyout.
According to takeover rules, Liberty must declare whether it is buying CWC or not by November 19.