By McPherse Thompson, Assistant News EditorCABLE & WIRELESS Jamaica (C&WJ) has recorded a 35 per cent smaller net profit in its 2002 financial year, partly because of an increase in its operating expenses as well as a doubling of its finance costs due to changes in the foreign exchange rate.
According to the group's audited income statement released last week, C&WJ made a profit of just over $2 billion, a $1.1 billion reduction on the $3.2 billion for the corresponding period the previous year.
Although the company's operating revenue grew by $2.4 billion to $26.5 billion, operating expenses was $270 million higher and net finance costs doubled from $609 million to $1.2 billion during the review period.
In notes to the financial statement, the company's president, Gary Barrow, and director, Patrick Rousseau, said C&WJ has continued to reposition itself to compete in the fully liberalised telecommunications market, which became effective on March 1, this year.
REVENUE GROWTH
They said revenue growth was achieved from diversifying the company's product portfolio, connecting to other domestic operators and investing heavily in sales and service improvements.
C&WJ said that with the significant expansion of the overall mobile market in Jamaica, outpayments made to third party operators increased from just over $3 billion to almost $5.4 billion during the year, in line with increases in airtime traffic on those third party lines. Outpayments are made for calls originating from C&WJ's network and terminating on the networks of other carriers.
The company said the increase in operating expenses was also reflected by the significant increase in Jamaica's mobile customer base, which has had the impact of increasing cost of sale associated with the subsidy on the sale of handsets, commissions made thereon, as well as the purchase of prepaid calling cards.
KEY BUSINESS PROCESSES
However, the C&WJ management said programmes to rationalise key business processes, reduce costs and improve operating efficiency were being accelerated to counteract the adverse effect on margins of the change in revenue mix.
"The company has been successful in reducing costs relating to consultancy and professional fees now that the regulatory framework associated with the transition to competition is almost complete," said the directors. "However, increased insurance costs arising from upward movements in rates, redundancy payments associated with ongoing restructuring and increased cost of sales ... have contributed to an overall increase in operating costs."
According to the statement, the increase in finance cost was related to exchange losses arising on operational transactions during the year, in addition to unrealised exchange losses due to a revaluation of foreign currency loans.
PREPARATION
C&WJ has also revealed that as part of its preparation for the adoption of International Financial Reporting Standards, which will come into effect during its current financial year, it has taken an exceptional write down in the value of its network asset base.
