The Bahamas Telecommunications Company (BTC) could lose $100 million when a second mobile company enters the market this year, BTC CEO Leon Williams suggested yesterday.
"Our forecasts show that the possibility exists [and] the rule of thumb is that a new entrant coming into the market normally takes 30 percent of the customer base," Williams said. "If the new entrant takes 30 percent of the customer base it means that BTC will lose one third of its revenue. Its revenue goes from $320 million a year to $220 million a year.
"The other school of thought is that a new entrant could possibly reduce its rate by 30 percent. So in a competitive environment when the market is liberalized no matter what the incumbent revenue or rates are, the new entrant would always come below that rate. If the new entrant's reduced new rate is equal to 30 percent of BTC's existing rate, it will take $100 million off."
The Guardian spoke to Williams shortly after his appearance on the Guardian Radio show "Connected" with Lester Cox.
BTC is offering voluntary separation packages (VSEPs) to its staff. It is also upgrading its infrastructure, Williams said. He said BTC has built 23 cell towers in the last six months, which have contributed to a reduction in the number of dropped calls.
"We spent $29 million so far on the cellular network," he said. "We have been able to reduce dropped calls from 1.8... down to 0.45 percent. When I came to BTC in July [2014] BTC's network was rated 14 out of 15 networks in the Caribbean. We were second from last... BTC by Cable and Wireless is now rated number 10.
"We're on our way up. We've hit the curb. Hopefully by the middle of this year when competition comes we'll be probably number five on the CWC network."
Prime Minister Perry Christie announced two weeks ago that the government intends to award a second cellular license by May. The Cellular Liberalization Task Force advised that it received submissions from Digicel (Bahamas) Holdings Limited, Cable Bahamas Ltd. and Virgin Mobile Bahamas Limited. Williams said one of the bidders has the potential to drive BTC out of business.
"One of the three named competitors, its principal owner declared last year a dividend to himself of $650 million," Williams said. "That's twice BTC's revenue. They could easily run a deficit for two years and put BTC out of business and then own the market. This is not something that you sit down and do a knee jerk reaction to. This is business 101."
Williams said BTC shareholders will have to give up some of their profits this year in order for BTC to make additional investments in order to continue its growth.
"We estimate that we'll need another $65 million this year to continue what we need to do," Williams said.
Click here to read more at The Nassau Guardian
