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C&WJ profit not convincing, says minority shareholder

Published:Wednesday | February 24, 2016 | 2:00 AMSteven Jackson
Orette Staple, outspoken activist on minority shareholder rights.

Outspoken minority shareholder Orette Staple needs convincing that telecoms Cable & Wireless Jamaica's (C&WJ) first quarterly profit in nearly a decade will benefit stockholders.

Staple and C&WJ managing director Garfield Sinclair and the C&WJ board are likely to square-off at the next annual general meeting.

"We need to see you declaring a dividend for us to believe that the profits you quote are correct," said Staple in an interview on Monday.

Under Sinclair's leadership, C&WJ's market share and stock price have increased, but Staple just wants a dividend. The last time the company paid dividends to shareholders was financial year 2007/08, according to Jamaica Stock Exchange records. It paid three cents in two tranches on November 26, 2007 and February 18, 2008.

"The profit to me is just paper. To me its not real profit ... they want to give the public the impression that things are happening and we do not see it," said Staple.

C&WJ made net profit at $144 million for the three months ending December 2015 on revenues of $6.1 billion which reversed the quarterly loss a year earlier of $1.8 billion.

Over nine months, however, the company recorded a net loss of $644 million, compared to a $3 billion net loss a year earlier. The quarterly profit comes at a time when US based Liberty Global seeks to acquire C&WJ's parent company Cable & Wireless Communications (CWC).

For several consecutive annual meetings, Staple more than any other minority shareholder has vocalised the call for C&WJ directors to pay dividends to minority owners of the telecoms. His activism comes within the context of three-and-a-half years of increased market share for C&WJ and growth in earnings before interest, taxation, debt and amortisation (EBITDA).

C&WJ, which now operates as FLOW, started to gain double-digit subscriber growth following regulatory and marketing changes. In June 2012 and then again in 2013, the Government slashed the wholesale calling rates between mobile networks in Jamaica. It resulted in aggressive marketing campaigns by mobile providers, with C&WJ gaining double-digit growth in mobile subscribers.

Staple once told Sinclair that he might not see a C&WJ dividend payment again in his lifetime. In 2014, he reasoned that despite the growth in market share that the company could last another decade without making an annual profit. At the time, he also questioned why the parent company CWC would pump billions into a loss making entity which pays no dividends.

Then in 2015, Staple argued that only CWC and not minority shareholders have benefited from the increased market share growth of the local subsidiary. Citing the company's financial disclosures, he argued that C&WJ makes billions in interest payments on related party debt especially from Cable & Wireless Jamaica Finance (Cayman) Limited. That debt is currently estimated at $46.7 billion as at December 2015, which C&WJ now services at a rate of $1 billion each quarter.

Staple asserts that the debt servicing affects C&WJ's ability to attain profitability and issue dividends. Then C&WJ chairman Chris Dehring downplayed those concerns, arguing that the loans are necessary and that the parent company offered them at preferential rates.

Sinclair will address his sixth AGM as head of the company this year. He remains C&WJ's longest serving head over more than a decade of leadership transitions.

steven.jackson@gleanerjm.com