On Saturday, the New BTL Board of Directors chaired their first Annual General Meeting as the leaders of the nationalized telecommunications company. On Saturday, they gave their first full accounting to the shareholders who had to tune in virtually to comply with the COVID regulations against mass gatherings.
But, the lack of face-to-face interaction did not stop the new management team from opening up to stakeholders about why the company's profit is down from 17 million dollars to 2.5 million, a 77% decline. Daniel Ortiz attended the virtual meeting to find out why:
On Saturday morning, over 40 persons tuned into a teleconference call via Microsoft Teams to participate in this virtual Annual General Meeting. The new BTL board, appointed by the recently elected Briceno Administration, had to account to the shareholders watching their investment in uncertain times.
Markhelm Lizarraga - Chairman, BTL
"I am sure you can all understand. It was quite an undertaking, trust me, to do all the things that we needed to do to get here today, and to be able to communicate with you."
In his first AGM as chairman, Lizarraga quickly cut to the chase about the state of affairs that he and the new management met when they got into office, and the challenges they must tackle head-on to improve this national utility company's profitability.
Markhelm Lizarraga
"Scrutiny of the financials revealed that in addition to an outstanding liability of 19 million in unpaid dividends to the Government of Belize, there were unrealistic expense provisioning for bad debts. This inadequacy contributed to an overly aggressive and unrealistic portrayal of profits over the periods 2018-2019, and 2019-2020. Returns on equity over the past few years were dismal and continued falling, and reports were heavily focused on growing EBITDA. This is earnings before interest, taxes, depreciation, and amortization. And these reports did not focus on an unsustainable growth in expenses, which resulted in declining trends in profits, over the years."
The CEO presented a more detailed assessment in his review of the company's financial past dating back to the last 10 years before. He started by discussing investments in network upgrades such as the 4G LTE mobile network, and the Fiber to the Home internet service.
Ivan Tesecum - CEO, Belize Telemedia Limited
"Let's look at the network infrastructure investments. When you think about this, this is what you call capital expenditure, and when you invest in infrastructure, it is because you expect to be able to increase your revenues, increase profitability because you're expanding the quality of service. You're expanding your coverage. Well, as the black line shows. It has increased over the last 10 years. Certainly, BTL has invested 468 million. Over the last 5 years, though, we've invested 311 million, vs the 5 previous years of 157 million. What has that been invested in during the last 5 years? Well, we have a modern 4G LTE advanced mobile network, one of the first in this entire region. We have our fiber to the home DigiNet network that now covers over 80% of this country. And, we also had to install a submarine fiber cable to San Pedro because we know what the tourism industry and what tourism means to the overall productivity of this country, and that is clearly shown by how we have been impacted in that area during COVID-19."
And for all these upgrades, the company has a hefty amount of debt to pay back.
Ivan Tesecum
"These investments have required large cash requirements. They have depleted cash reserves, whilst increasing the long-term portfolio, and requiring the use of overdraft facilities. And that is shown, here, whereby, we have increased - and you see the black-line again showing an increase from left to right on your screen. And this has been, in terms of an increase in long-term liabilities to finance, 1.) the 50-million-dollar 4G LTE Advanced network, 2.) the 96 million dollar fiber to the home network, which is called DigiNet or DigiTel. We've invested 22 million on the convergent billing project. And we've invested 18 million on the sub-C fiber cable to San Pedro, amongst other projects. Well, what are the loans that we currently have? Our long-term loans at this point are that we have a 30-million-dollar, 7-year Atlantic Bank loan, which is at a rate of about 6.9%. We have a 35-million-dollar, twelve-year Taiwan ICDF loan at 5 and a half %. We have a 12-million-dollar GOB loan that is not cash-impacting but is an exchange for services. And we have a 3.5-million-dollar, 5-year loan with St. John's Credit Union at the rate of 5 and a half %, and that is the Digi-learn Project that we had."
From BTL's assessment internal assessment, its revenue growth isn't matching the increase in debt servicing costs:
Ivan Tesecum
"When you invest in infrastructure, the goal of it is to be able to increase the revenues. And what does this show? Well, what the current graph shows is that whilst there has been significant growth in the network infrastructure, the growth in revenues, year to year, has fluctuated, and in some years, been negative. And that can be seen from 2015 to 2019, where you see a steep decline in the overall growth of gross revenues. Well, the decrease in prices on services due to significant competition from the other mobile provider - we have internet service providers and cable operators - has created a race to the bottom on prices, which whilst it has benefited consumers, has impacted the revenue growth overall of BTL expenses has outpaced the growth in revenues over the past 10 years, and you can see the trend line, it shows that it has had a negative, or an adverse effect on the overall profitability of the company. So, this decrease in net profitability, again, is due to the fact that the expenses have been greater than the growth in revenues."
"Despite the decrease in profitability, though, the company continue, during all those years, to declare annual dividends greater than the minimum required 45% of net income, in some cases, as high as 67%."
Despite these challenges, this new BTL management team thinks that they have ideas to turn this resilient company around. These are a few of the ideas they pitched to the shareholders.
Ivan Tesecum
"We have put together a bubble chart and these initiatives. These are new revenue opportunities, examples of these, and other cost optimization that can be done, and will be done. And what we have placed it is the size of the bubble means the positive impact to the overall achievement of what we have."
"Small business, we believe that presently, because of COVID-19, there is a large market to digitize. We know everything, for the most part now, has been ramped up. We know that the COVID-19 will not go away any time soon. We know this new fiscal year, we'll be under continued pressure, as we expect. So, small businesses will have to ramp up in terms of digitization what they need to offer. We believe that we are well poised with our suite of services, and new services that we need to bring in to be able to offer. E-commerce is something big for us. Digi Home, we'll begin offering services that go into the home as well. And lastly, I think one of the most exciting ones is the Digi wallet, a mobile financial services platform that we'll be offering that will allow us to be able to use our cell phones as your new wallet."
Markhelm Lizarraga
"We know the road ahead will not be easy, and we're no operating in a considerably different environment, with additional economic head-winds that did not exist last year. Despite these circumstances, we remain optimistic about BTL's future. BTL has been and is a resilient company with a stronghold in Belize's marketplace."
In financial year 2019 - 2020 - which is mostly before COVID, revenue grew by 4% while expenses grew by 10%. THE FORECAST is to lower expenses in the current fiscal year by 22%, and increase profits by 125%.
