LIME Jamaica low on cash
Published:Wednesday | February 15, 2012 | 12:00 AM
Steven Jackson, Business Reporter
Early reports of a telecoms agreement on inter-connection rates were doused last night after Minister Phillip Paulwell clarified that the parties had only agreed a framework on which an eventual deal could emerge.
LIME Jamaica's Garry Sinclair said new rates and the timelines on which they would be implemented have not been agreed, and that it is likely that the rates will have to be imposed by a regulator.
Sinclair is pushing for progress on 'emergency' legislation that was supposed to speed up the setting of interim rates by the minister or his regulator, until a final position is agreed on cross-network charges.
The delay can only hurt LIME Jamaica, which is reporting a second quarter of negative cash flows amid losses that have climbed to J$1.2 billion in the third quarter ending December, and fewer mobile subscribers to prop up the business.
Concurrently, the UK bid by Vodafone to acquire Cable & Wireless Worldwide (CWW) will not affect the Jamaican operations as it is a separate parent entity, LIME's local management said Tuesday.
The separation followed a demerger of C&W plc to create CWW and Cable & Wireless Communications (CWC), the latter incorporating the businesses in the Caribbean.
Last night, Paulwell said after three weeks of talks involving Flow, LIME and Digicel, the parties had agreed to the introduction of local number portability for both fixed and mobile networks; establishment and resourcing of the single telecommunications regulator; and a review of the universal service obligation to make broadband services more easily accessible.
Sinclair said the press release basically announces "that we are trying to get to a deal". He said eventually interim rates are "going to have be imposed" by either Paulwell or the Office of Utilities Regulation.
LIME wants the government to move immediately to pass and enact the emergency legislation already tabled, but Paulwell yesterday signalled he was still studying its provisions.
"... It is my intention to conduct an immediate review of the emergency legislation that was tabled in Parliament by the previous administration, so that the regulator can be empowered to impose interim rates, pending their final determination under the existing schemes of rate regulation," the minister said.
Lime Jamaica reported negative cash of J$75 million in the September 2011 quarter and a slightly improved J$62 million cash deficit at December - its first time reporting negative cash flow and equivalents since at least 2009.
For the nine-month period, the telecoms lost J$3.8 billion on the back of a marginal decline in revenue from J$15.7 billion to J$15.5 billion.
The results led its UK parent C&W Communications in its regional assessment issued last week to describe Jamaica as a "difficult market", and signalled that the local operation would take a non-cash hit for its full year ending March.
"Outside of Jamaica, mobile subscribers were in-line with the prior year, whilst mobile subscribers in Jamaica declined as we discontinued certain promotional activities in the prepaid market. Our market position in Jamaica remains difficult, and we continue to experience poor financial performance in this business," stated CWC in a statement accompanying the financials.
"As a result, we expect a significant non-cash write-down of our carrying value of this asset as part of our full year results."
The parent company did not state the mobile numbers.
Sinclair, who has run the company since October 2010, said last week that the company had 380,000 mobile subscribers of which 290,000 were active, and that the company would continue to rack up losses unless an accommodation is reached on reducing inter-connection rates.
LIME also disclosed that the company would record a non-cash write-down of the carrying value of LIME Jamaica's assets at its March yearend but said it would try to arrest its possible negative impact on the company's value.
"Although this is anticipated to accelerate the negative trend in the company's equity position in the short term, the company is working assiduously to halt the trend, including for change in the regulatory environment," said Sinclair, managing director at Lime Jamaica & Cayman, in statements accompanying the financials.
J$17-billion deficit
LIME's accumulated deficit has climbed to more than J$17 billion. Concurrently, its equity base has diminished to J$2 billion on its December 2011 unaudited balance sheet, reflecting book value of two cents per share. The company's stock is worth less than 20 cents on the Jamaica Stock Exchange but has traded as high as 29 cents in the past year.
LIME a decade ago was overtaken almost immediately by Digicel as mobile market leader of the newly liberalised telecoms sector. Currently, the mobile market stands at 2.9 million, two million of which are Digicel subscribers.
"Our business continues to operate under challenging circumstances, in particular an unfavourable regulatory regime which continues to afford our major competitor a distinct advantage while hampering our operations," said Sinclair, who described the quarterly performance as challenging but highlighted positives, including the doubling of its third quarter operating profit or EBITDA to J$501 million year on year before restructuring cost of J$149 million.
Nine-month EBITDA was J$1.1 billion before restructuring costs of J$346 million.
The improvement resulted from a "robust performance from our fixed voice international business" and an 8.0 per cent increase in mobile gross margin, Sinclair said, adding that LIME's focussed subscriber retention activities yielded positive results with churn falling across all lines of business.