Business

LIME fights on, but loses more

Friday, November 09, 2012    

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LIME'S fight for mobile subscribers may have returned strong gains for the beleaguered telecoms company.

But the new call tax implemented mid-July and tougher competition in broadband has eaten away at the company's revenue.

What's more, LIME posted another billion-dollar loss during the quarter that ended September 30, pushing its accumulated losses past $35 billion.

The British-owned firm reported that its mobile revenue climbed by 21 per cent during the three months to September 30, when compared to the corresponding period last year. This was as the result of 20 per cent growth in subscribers and a 12 per cent rise in average revenue per user (ARPU) from its calling plans — XL and Talk EZ.

"Our Talk EZ plan attracted 100,000 subscribers in 100 days," said Garfield Sinclair, managing director of Cable and Wireless Jamaica, which operates as LIME.

The company said that ARPUs for postpaid mobile increased by six per cent, prepaid by 11 per cent and broadband by three per cent.

"Our fixed line business benefited from improved margin percentages due to reduced payments to other local operators, which are now being charged at the lower termination rates and on a per second basis," said Sinclair.

He was referring to a lowering of cross network charges from $9 a minute to $5, which was enforced by the Office of Utilities Regulations.

Indeed, during the quarter under review, payments to other operators fell by 40 per cent, or by $563 million, when compared to the same period last year.

However, revenue for the quarter was down by 12 per cent year on year to $4 billion.

"The special telecommunication tax implemented in mid-July had a strong adverse impact on fixed-voice revenue, which declined by 13 per cent," said Sinclair.

The new tax — five cents per minute for all calls between local landline numbers — was implemented the same day the termination rates were lowered.

Sinclair also said that "broadband revenues have fallen as a result of a net reduction in subscribers and lower priced packages".

Lower revenues coupled with increased advertising and marketing cost and a lower gross margin resulted in a smaller operating profit, from $435 million during the three months ending September 30, 2011 to $93 million during the review quarter.

What's more, the telecoms company continued to undergo a restructuring exercise, which resulted in its incurring expenses of $512 million, consisting primarily of one-time termination benefits.

As a result, LIME's net loss was $1.3 billion — similar to year-earlier levels — and its deficit climbed to $35 billion, while its current liabilities are still $1.6 billion above its current assets.

Moreover, LIME's long-term borrowing from Cable and Wireless increased by $1.2 billion over the six months to September 30.

However, back in the UK, executives expressed optimism over the Jamaican subsidiary's performance.

"We saw improving results in Jamaica, where our 'fightback' campaign is gathering momentum following regulatory changes made by the Government," said Tony Rice, CEO of Cable and Wireless Communications, LIME's parent. "We have seen good traction in the key market of prepaid mobile and the business is re-energised."

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