• Regulator acts over 2021 outage complaints

• Aliv losses cut by 23% to $31.4m during ‘22

• Gov’t share of operator losses now at $87m

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas is pledging to appeal the adverse findings and fines levied against it following a probe into the “quality of service” provided to its pay-TV customers during the 2021 calendar year.

Franklyn Butler, the BISX-listed communications provider’s president and chief executive, declined to comment on the Utilities Regulation and Competition Authority’s (URCA) action beyond saying the company “doesn’t understand how they did their investigation”.

The results of the probe were revealed in Cable Bahamas’ just-released financial statements for the year to end-June 2022 as part of its necessary disclosures to shareholders as a publicly-listed company. It reassured investors that the fines imposed by URCA were “immaterial” when set against a balance sheet featuring almost $542m in assets, and $$36.5m in net equity, indicating that penalties are not significant. 

“On November 21, 2022, URCA issued a final determination and order against the company with respect to certain matters relating to its compliance with quality of service standards in the provision of its pay television services during the period January to December 2021,” Cable Bahamas conceded in note 16, which deals with “commitments and contingent liabilities”. 

“The group intends to appeal the matter. No provision has been accounted for in these consolidated financial statements on the basis that management considered the penalties were immaterial to the consolidated financial statements as a whole.”

Carlton Smith, URCA’s chief executive, did not return Tribune Business phone calls or e-mails before press time last night. The electronic communications regulator has yet to release the “final determination and order” made against Cable Bahamas, although these are normally made public at some stage, so the specifics of the complaints and findings made against the BISX-listed provider remain undisclosed as does the size of the fines.

Mr Butler, when contacted by this newspaper, said: “I don’t have any comment on it given that we’re going to appeal it. I don’t thing it’s helpful to comment on it because of that. The only thing I will say is we don’t quite understand how they did their investigation, but I don’t have any real comment on it.”

URCA served notice in July 2021 that it planned to investigate the service quality offered by Cable Bahamas when it approved the restructuring of its Rev pay-TV package. The regulator said at the time it was “majorly concerned” by the length and frequency of outages suffered by customers, adding that it was unable to ignore “recurring complaints” from Bahamians about service interruptions and other issues.

Reporting on consumer responses to the REV TV restructuring consultation, URCA said then: “Complaints regarding Cable Bahamas’ service quality were a recurring theme in the responses. In addition to public complaints, URCA is aware of persistent and wide-scale service interruptions in the form of error messages consistently appearing on screen, regular service outages at 2am, pixelated channels and other issues.

“Although comments concerning service quality are out of scope for the current application, URCA is majorly concerned with the level and frequency of service interruptions and will open an independent investigation following the publication of URCA’s final decision to better understand these and other matters surrounding Cable Bahamas’ service quality.”

The communications industry regulator had urged Cable Bahamas customers to bring such issues to its attention via its “complaint handling process”, and added that its “quality of service” regulations may be able to redress some of the problems. However, URCA did not do what many had urged in their feedback, and require that service quality issues be addressed before it approved Cable Bahamas’ REV channel package restructuring and any associated price increases.

“Many respondents were unhappy with Cable Bahamas’ television service quality due to recurring outages, error messages, pixelated channels, an incorrect TV guide (what was stated on the TV guide did not match what was shown on TV), and dissatisfaction with DVR boxes,” URCA said last year.

“Respondents felt that Cable Bahamas should correct its service quality issues before restructuring its packages or increasing its prices. Respondents were unhappy that they did not receive any reimbursement for Cable Bahamas’ outages or service disruptions.

“In their view, Cable Bahamas did not practice any leniency when applying late fees or sending bill reminders despite regular disruptions. Some blamed Cable Bahamas’ reduction in subscribers on the poor quality of service instead of the advent of competing streaming services which Cable Bahamas attributed the subscriber attrition to in its applications,” URCA continued.

“Others claimed they would be willing to spend more on pay TV if Cable Bahamas improved the quality of service. Respondents felt that Cable Bahamas should improve its service quality before applying for any type of price increase or restructuring of its packages.

“On a similar note, some respondents felt the repackaging changes were not enough to improve their level of satisfaction with Cable Bahamas. In addition, for those who no longer subscribe to Cable Bahamas’ TV services, some stated the repackaging would not make them resubscribe.”

Meanwhile, Cable Bahamas’ financials reveal that the company’s $11.257m net loss for the year to end-June 2022 was driven entirely by the $31.448m worth of ‘red ink’ incurred by its Aliv mobile subsidiary. Aliv’s were slashed by 23.1 percent compared to the prior year’s $40.921m, while Cable Bahamas’ own losses were cut by more than half - down some 60 percent - compared to the $28.09m suffered in its 2021 financial year.

Besides Aliv’s improved performance, Cable Bahamas was able to stem the financial bleeding by through more than doubling profits from its core TV and Internet business lines, which increased by 112.8 percent from $6.911m to $14.706m year-over-year.

The nine-figure costs associated with Aliv’s nationwide infrastructure build-out, which last year resulted in $21.882m in interest (debt servicing) expenses, coupled with continued depreciation and amortisation write-downs on the value of this network to the tune of $26.431m, remain a drag on the mobile operator’s contribution to Cable Bahamas’ bottom line in the short-term.

However, the $2.8m net profit generated by Cable Bahamas for its 2023 first quarter hints at better times ahead. This was was aided by a more than $2m, or near-50 percent, year-over-year decline in interest expenses which fell from $4.31m to $2.173m.

Revenues rose slightly, improving by 4 percent from $53.402m in the prior year to $55.579m, while operating expenses narrowed by 2.6 percent from $35.589m to $34.654m. As a result, operating income before depreciation and amortisation jumped by more than $3m, rising by 17.5 percent from $17.813m to $20.925m.

Cable Bahamas’ 2022 financials, meanwhile, reveal that the Government has incurred total losses of $86.765m on its 51.75 percent majority share in Aliv since mid-2016. The Government’s interest is held through HoldingCo.

“As of June 30, 2022, Be Aliv Ltd is not in compliance with certain terms and conditions of contractual agreements between Be Aliv and the company (Cable Bahamas), which impacts the obligations of HoldingCo pursuant to the shareholders agreement,” the financials said. 

“Accordingly, the group has taken the necessary actions to have the obligations of HoldingCo met, which will ultimately result in Be Aliv Ltd being in compliance with all terms and conditions of the referenced contractual agreements.”

Mr Butler said this related to the extra $50m in capital raised when Cable Bahamas refinanced some of its existing preference shares classes in mid-2022. It has offered to use this surplus to assist Aliv with repaying some of its long-term debt, and is now talking to HoldingCo and the Government to determine if this is an option they wish to take.

“All of that is tied to the refinancing,” he explained of the reference to non-compliance. “What is happening is that we are starting to make provisions to pay Aliv’s long-term debt, and if they don’t pay Cable under the management services agreement, it’s a breach of the management services agreement. We’re trying to refinance so that we do not have any breach in that regard.”