Strong performance and improving platform for growth: CWC performance as of March 2015
Highlights
- 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
- Recommended final dividend per share of US2.67 cents; full year dividend per share of US4 cents (2013/14 US4 cents)
Group revenue in the 2014/15 financial year grew by US$64 million or 4% (US$39 million or 2% excluding Sonitel and adjusting for currency movements). This represents the Group’s best revenue growth in five years. We saw growth across our Mobile, B2B/B2G and Video lines of business, as well as some encouraging signs for our Fixed Voice business as we refreshed tariffs and introduced innovative products to make the category more relevant for our customers. Broadband performance was disappointing with 1% growth but we are optimistic that the acquisition of Columbus will address the challenges we face, in particular in terms of faster network speeds.
Mobile network improvements through Project Marlin investments in HSPA+ and LTE have contributed to mobile data revenue growth of US$48 million. Traffic on our mobile networks grew 39% in the year and across our Group 44% of customers now has a smartphone. With the launch of a number of value added services we also began to broaden our mobile data offering beyond pure connectivity and we added some 560,000 new data plans (1.6 million in total).
Our Panama business maintained its mobile market share of greater than 50% and delivered a 4% rise in revenue driven by mobile data and subscriber growth outstripping lower ARPU. EBITDA was up 1% on a reported basis, but declined by 1% adjusting for the acquisition of Sonitel as operating costs increased by 5% due to higher marketing spend as we launched improved broadband services and a revamped video offering whilst there was also an increase in the minimum wage of up to 15%.
In the Caribbean, our Jamaica business continued to attract new mobile subscribers (up 107,000 or 15%) and gain market share, leading to 19% revenue growth (30% at constant currency). Our investments in networks and our “Upgrade Caribbean” programme led to a 10% increase in LIME mobile revenue with HSPA+ speeds now provided across the region, albeit with challenges in broadband due to delays in fibre rollout. Total reported revenue grew 3% year over year.
In The Bahamas, revenue performance declined 2% as we prepared BTC for the advent of mobile competition by reducing prices and updating roaming agreements whilst also being impacted by the introduction of VAT. We continue to anticipate that a new mobile operator will enter the Bahamian market before the end of this calendar year, which will further adversely impact performance in 2015/16. Our agreement to transfer 2% of our shares in BTC to the newly formed charitable BTC Foundation during the year, cemented our partnership with The Government of The Bahamas and will ensure investment in good causes for the benefit of the Bahamian people.
We continue to exercise cost discipline in all areas of the business and the initiative to reduce our run-rate operating costs by US$100 million by the end of 2014/15 was achieved with c.800 team members exiting the business over the two years in addition to our exiting non-core property assets, and investing to reduce power consumption. As we integrate our business with Columbus’s we will look to drive further process efficiencies.
In the second half, we generated EBITDA of US$308 million which was up 11% on the first half and 10% on the second half of the prior year (profitability is typically weighted towards the second half). This performance represents growing momentum across our business which we aim to continue.
Acquisition of Columbus International Inc.
On 31 March 2015, Cable & Wireless Communications (CWC) completed the purchase of 100 per cent. of the equity of Columbus International Inc, a leading privately-owned fibre-based telecommunications and technology services provider operating in the Caribbean, Central America and the Andean region.
We expect the operating synergies to be significant; together the new company creates the opportunity to invest more, grow faster and provide an improved customer experience and most importantly, a development opportunity for our people that neither company could have achieved on their own.
The transaction will accelerate both our mobile leadership and our fixed mobile convergence strategies, enabling customers, for example, to have seamless access to high quality video content as they move between devices and locations. The streaming of video content onto mobile phones will accelerate. In fixed line, the significant improvements in our networks along with Columbus’ broadband capabilities will deliver an outstanding online experience with faster speeds and wider coverage. The transaction also brings significantly improved content and advances in video delivery and cloud based services.
In terms of Business-to-Business (B2B) and Business-to-Government (B2G), the transaction expands CWC’s regional footprint bringing additional national and international connectivity to better serve multinational customers, as well as opening up Latin America’s high growth markets. These opportunities are well aligned with our new CWC Business Solutions unit’s focus and capabilities.
As part of the regulatory approval process, we intend to dispose our 49 per cent. stake in TSTT in Trinidad & Tobago and certain overlapping terrestrial fibre assets in Barbados.
Commenting on the Group results, Phil Bentley, Chief Executive of Cable & Wireless Communications PLC, said:
“2014 was a year of transformation and growth for Cable & Wireless Communications (CWC). We created a new senior executive team operating out of our new Miami hub. We developed a new vision and strategy for the Group, backed by our US$1 billion “Project Marlin” investment programme. We began to execute a performance improvement plan and deliver our strategy to grow. The team’s hard work has started to deliver results as we saw top-line growth for the first time since demerger and EBITDA margins improve.
“In addition to our improved operating performance, we completed the sales of our Monaco Telecom business for US$445 million in May 2014 and our stake in Solomon Telekom for US$16.5 million in October 2014, and, through the acquisition of Sonitel in Panama for US$41 million, added our first acquisition in support of our Business Solutions division. Most importantly, in November 2014, we announced an agreement to acquire Columbus International Inc. (Columbus) for US$3.025 billion, which was completed on 31 March 2015.
“This is a transaction that transforms CWC, and is one that will accelerate the delivery of our strategy across the Caribbean and Latin America. Columbus is an outstanding business, backed by a state-of-the-art terrestrial and submarine fibre network. Our complementary fixed line and mobile networks and our focus on providing the best customer service, bringing together the skills and capabilities of over 7,500 team members, will position us better to serve our customers and improve the ICT infrastructure of the communities in which we operate.
“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.
“Overall we are pleased with the results following the first year of our new strategy, but there remains much to do to realise the full potential of the business.”
