BTC profitability under siege

Well placed industry insiders have serious doubts regarding Botswana Telecommunications Corporation Limited (BTCL)’s profitability post-privatisation. The startling revelations come just a week after former Public Enterprise Evaluation and Privatisation Agency (PEEPA) also made the same prediction.

This week, BG Business talked to a reputable insider who was worried that with the recent completion of assets transfer that saw BoFiNet acquiring almost all assets that were under the BTC, the latter would remain valueless and less attractive to investors. The source suggested that with BTC’s decreased asset value, the company is likely to offer its securities at its Initial Public Offering (IPO) at a diminished share price. The revelation did not however go down well with the BTC Chief Executive Officer (CEO) Paul Taylor who said that within certain bounds, it was not the assets of a company that drive value, but rather its net cash-flow. By the financial year ending 31 March 2012, BTC assets were valued at over P2.3 billion.

However, following the privatisation process, the newly established Botswana Fibre Network (BoFiNet) acquired over P1.4 billion in assets from the BTC, an equivalent of over 50 percent of BTC’s asset value. BoFiNet CEO, Mabua Mabua said his company, established to be the whole telecommunication provider, acquired national assets worth P1.4 billion from the BTC. The assets include the Dense Wavelength Division Multiplexing (DWDM) designed to use the national fibre networks (EASSY and WACS) to their full potential.

BOFINET also acquired 6000 kilometres fibre coverage, whose value is estimated at USD 49.9 million and the countrywide Points of Presence (PoPs). Before BoFiNet gained ownership of almost all assets previously owned by the BTC, the latter’s performance was driven by the assets currently under BOFINET ownership. BTC operates three units under its core business, being the broadband (ADSL, Mobile Data, Internet); the Mobile Voice and Data and the Fixed Voice and Data, which need mostly Internet for BTC to offer the services. BTC used to get Internet for free using the same fibre networks that are now owned by BoFiNet. Post-privatisation, it has emerged that BTC, will now purchase Internet from BoFiNet just like all Internet Service Providers (ISPs), which sources said will deduct millions from the BTC coffers. Taylor however made it clear that many factors will affect the trading position of BTCL in the 2014/15 periods. “We are still finalising a number of them with stakeholders,” he said.

We are also currently going through our budget planning cycle, so we cannot go into details,” he said. Taylor admitted that the privatised BTCL will have to pay BoFiNet for Internet, but declined to reveal how much BTC will pay for Internet. Taylor said historically, BTC’s income came from its traditional business of exchange lines and leased circuits. “This area of the business accounted for 60 percent of our revenue while our wholesale business and mobile accounted for 20 percent each,” he said. He stressed however that this is the area of the business that was augmented over time such that more advanced products such as Metro Ethernet are also provided. BTC’s revenues for the year ending March 2012 had grown significantly to P1.1 billion with profit for the period pegged at P234 million. Taylor is further convinced that post privatisation, BTCL has the potential to be as profitable.

To him, strategies are in place to sustain its profitability. He said BTC has been transformed to a company that supports its vision of being a converged fixed and mobile services company. He said through a programme called Accelerate Change, they would be improving the levels of automation in the company. “Our automation levels currently stand at 15 percent, while a world class company would operate at 70 percent automation,” which he said would be achieved in 24 months’ time. Taylor also said that BTCL is pinning their hopes on the mobile division, be Mobile, which he said has so much growth potential. “In the five years of Be Mobile’s existence, we managed to snatch 15 percent market share from the two existing mobile network services monsters. “Our plan is to accelerate our market share and have more competitive products.

We are building a strong additional network capacity so that we push aggressively forward in building higher market share,” he said. Be Mobile, according to the CEO also has a competitive advantage of its presence even at the remotest areas. Be Mobile currently has over 300 000 users, while BTC’s traditional fixed line business has over 200 000 voice ports. With increased penetration in the mobile division, Taylor says he expects the fixed line phone numbers to remain stable while the mobile business would grow.

Last modified on Friday, 14 February 2014 16:26

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