By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Achieving EBITDA margins greater than 30 per cent is vital to the Bahamas Telecommunications Company (BTC) maintaining annual capital expenditure at around $40 million, a senior executive has confirmed

Marlon Johnson, BTC’s senior vice-president of brands and marketing, told Tribune Business that the carrier and its Caribbean affiliates would need to generate healthy returns if they were to produce the cash flow, and profits, necessary to finance infrastructure upgrades “on a sustained basis”.

Speaking after BTC’s 51 per cent majority shareholder, Cable & Wireless Communications (CWC), revealed plans to strip out $100 million of costs group-wide over the next two years, Mr Johnson said the Bahamian carrier had its own “ambitious target”.

Emphasising that BTC was not looking at another round of major staff reductions, and was focusing on “non-human resources” costs, Mr Johnson told Tribune Business: “The challenge for the [CWC] group, and for BTC, is becoming much more efficient operationally.

“A big driver is the investment we’re making in our IT core [the Next Generation Network]. That will allow us to reduce expenditure in terms of electricity, buildings to house it and maintaining it, as it will be more efficient.

“We have a lot of planned efficiencies,” he added. “You’re going to see us making a more concerted effort to improve our online presence, and when a customer call or contact comes in, make it easier with self-service. It will make us more efficient and reduce the paperwork.

“The long and the short of it is that we have to find smarter ways of increasing our footprint and doing what we need to do. Our challenge is to become more cost efficient and give ourselves the headroom to reduce prices. If we want to become price competitive in the long-run it will be tied to efficiency.”

BTC’s revenues for the year to end-April 2013 were relatively flat year-over-year, CWC executives confirmed, due to price cuts of up to 40 per cent as the carrier prepares for competition next year. Volumes, though, were up, as well as revenue per cellular subscriber (yields).

When it came to BTC’s own cost reductions, Mr Johnson said: “We have an ambitious target. We believe we have a lot of non-human resources costs we can manage a lot better in the business.

“We have a clear focus on non-human resources costs - getting better network efficiencies, more automated processes, expanding our retail footprint in a much more efficient way.”

A key element of the latter goal is BTC’s recently-announced retail franchise expansion, which aims to add another 30 franchise stores - run and owned by Bahamian entrepreneurs - within 18 months. The planned roll-out could inject up to $8 million into the economy via construction and support services expenditure.

“We have a clear sense of where we want to go. We recognise there’s no quick fix to get there,” Mr Johnson told Tribune Business.

“We still have to deliver. The demands from the customer are getting greater. They want more bandwidth for their dollar, more value added. And the competition is increasing, not decreasing.”

He added that BTC and its affiliates in CWC’s Caribbean regional business, LIME, faced a “shared challenge” due to the constant evolution of communications technology.

Referring to CWC’s target of a minimum 30 per cent EBITDA (Earnings before Interest, Taxation, Depreciation or Amortisation) margin target for the Caribbean region, Mr Johnson said: “Infrastructure needs to be built and replaced, and that allows us to continue to invest at $40 million [per annum].

“We envision that we’re going to need that on a sustained basis. If we want to upgrade plant, replace old plant and add new technological elements, we have to make sure our returns are healthy.

“That will be key to success in the long-term. If we look at it going forward, we have to stay in that [30 per cent] range if we want to continue that capital expenditure.”

Top Cable & Wireless Communications (CWC) executives, addressing last week’s conference call on their 2012-2013 annual results, conceded there was “more work to be done” at BTC despite the carrier effectively accounting for much of the year-over-year improvement in its Caribbean business.

CWC’s annual results statement conceded that “much of the improvement has come from our Bahamas business” in referring to the 5 per cent year-over-year operating cost reduction in the Caribbean.