Cable and Wireless posts loss on takeover

But forecast ups expected synergies

Cable and Wireless Communications dropped to a $1 million pre-tax loss during the first six months of 2015 ending in September, compared to a $154 million profit during the same period last year, as a result of finance expenses related to its acquisition of Columbus Communications. 

However, revenue was up 4 percent to US$1.2 billion, and the group forecasts higher than expected synergies from last year’s $1.85 billion takeover of Columbus. CWC upgraded the operating cost synergies from the transaction by 47 percent to US$125 million. 

The group, which recently launched its unified FLOW brand in Cayman, Barbados, Jamaica, Trinidad and Tobago, and St. Kitts and Nevis, said it had achieved US$25 million total net run-rate cost savings with an anticipated exit run-rate of US$70 million for 2015/16. Phil Bentley, chief executive officer of Cable and Wireless Communications, said the company has significant growth and synergy potential. 

“We are pleased to have identified additional synergies, lifting our previous US$85 million expectation to US$125 million whilst maintaining the same anticipated costs to achieve those savings,” he said. 

In addition, Mr. Bentley said, there would be significant opportunities to deliver revenue synergies from cross-selling and up-selling, which, combined with infrastructure investments, would be the basis for “material revenue growth.” 

Cable and Wireless is in the second year of a US$265 million capital investment plan, named Project Marlin, which is focused on fixed network integration, fiber rollout and reinforcing the company’s mobile networks. 

Having established HSPA+ as the minimum network standard across CWC’s mobile footprint, the company now targets LTE upgrades in select markets.  

Mr. Bentley said he expects CWC to deliver a strong second half and full year performance in line with the outlook.  

“Momentum generated from our investments, and synergies from the integration led to 11 percent growth in [earnings before interest, tax, depreciation and amortization] in the second quarter versus last year, further underpinning confidence in our three-year plan. We expect this momentum to continue in the second half,” he said. 

CWC said overall economic growth prospects in its markets remain positive. While Caribbean markets are showing a modest economic recovery with low growth rates, Latin American countries such as Panama and Colombia have relatively robust forecast GDP growth rates of 6 percent and 3 percent, respectively. 

Some of its markets have experienced currency devaluations against the U.S. dollar during the past year, but the company noted that 87 percent of CWC’s earnings are either managed or pegged to the U.S. dollar. 

“Although we face increasingly competitive conditions within some markets, for example with the introduction of mobile competition in the Bahamas later this fiscal year, and continued subsidized mobile offers in Panama, we expect to continue making good progress in growing our video, broadband and B2B revenue and reducing our operating cost base following our acquisition of Columbus,” CWC said. 

The company reported overall customer growth of 6 percent, including a 38 percent rise in mobile data subscribers and a 7 percent growth in broadband subscriptions. 

The company said it is not declaring an interim dividend given its announcement last month that it is in talks about a buyout by telecoms giant Liberty Global PLC. 

Mr. Bentley
Mr. Bentley