And like all companies both locally and internationally, BTL has also been hit by the economic impacts of the ongoing COVID-19 pandemic. The company is reporting that at the end of January 2021, their gross revenues are down by 27 million dollars or 19%, when compared to last year January.
Here's what the chairman had to say about how they account for that decrease:
Markhelm Lizarraga "We have seen certainly revenues decline. We have had a decline in revenue of about 27 million, some 19% which is pretty much in line with what's been happening in Belize. Our prepaid revenue has come down and we think that in some part the lack of economic activity especially in the tourism sector has impacted on this."
h3>Phone Company Plans To Sharply Cut Costs
But, the staff at BTL were prepared for that financial hit, and so, they managed to decrease the company's operational expenses by 22.2 million dollars for this financial year. The chairman publicly thanked them for the initiatives, which allowed the company to minimize the impacts of the decrease in gross revenues:
Chairman Says Monies Being Recovered From Former Chairman
And during the interview, the topic of Nestor Vasquez, the former chairman of BTL, came up.
Vasquez stepped down from the company in September of last year after allegations emerged that he misused the company's corporate credit card and ran up hundreds of thousands of dollars in bills on it.
When he was asked about the matter, the new chairman briefly said that BTL is still pursuing that matter with intention of recovering the full sum that is owed:
Reporter "Is there any update on the Net Vasquez situation?"
Markhelm Lizarraga "What I can say is that this matter is with our attorneys and it is as the reports that I receive at the last board meeting a couple of days ago is that we are proceeding with the matter and we are going to take all actions necessary for the recovery of those sums."
We understand that Vasquez has repaid somewhere in the vicinity of 300 thousand dollars, but the matter is now under review by accountants, because of differing figures coming out of two audits assessing his indebtedness.
BTL has To Recover 44m From Customers
But while the company is expecting a growth in profits for this financial year which soon finishes, they still have a major headache to deal with. They have come clean to the shareholders that a segment of Belizean customers owe them a total of 44 million dollars in arrears that they are trying to collect. Under the previous Board, there was series of moves to change the company's billing processes, and it appears that the roll-out of their new systems did not go according to plan. And so, some customers weren't obliged to pay for services already rendered. On Saturday afternoon, in a virtual interview after the AGM, Chairman Lizarraga explained what occurred some 2 to 3 years ago:
Markhelm Lizarraga "BTL embarked on an exercise to consolidate its collection software, its billing software into one, they had several and they wanted to put it into one system and when that was commissioned it was commissioned with a clear roadmap and clear plan and the plan changed and certain upgrades were offered in this period of transitioning and it complicated matters and a series of decisions eventually led to the collapse of this plan. The end net effect was that BTL found itself in a position where it could not disconnect people who had not paid. Subsequent to that, the decision was made not to collect from people and that decision carried forward until we are here where BTL has some 40 million dollars in receivables accumulated over the last 3 years. BTL has been working with its clients and we've put a lot of these people on payment plan and we are in the process of continuing to work on this system so that we are in a position to clearly tell people look here is the bill for this month, at least take care of the bill for this month and make plans to pay the outstanding arrears."
The chairman says that some of the customers are cooperating by agreeing to payment plans.
BTL Breaks Bad News Of Low Profits at AGM
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%.
Last night, we brought you coverage of the honest and open conversation that the new BTL Board of Directors had with the shareholders at the company's 14th Annual General Meeting. That event was carried out virtually, and the new Chairman and the company's CEO gave detailed presentations on why the profitability of this national utility company had fallen so significantly. Explanations were offered on the company's performance over the last 10 years, the impacts of the COVID-19 pandemic on the company's gross revenues, as well as plans that this new board of directors and management have for turning the company around.
The question of how long it would take for taxpayers, to get a return on the investment that the Barrow Government made to regain ownership of BTL for just about half a billion dollars did come up.
The new chairman told the press this weekend, that if he and the new management team can turn the company's fortunes around, the full return on that investment will be approximately 25 years. Here are those comments:
Markhelm Lizarraga - Chairman, BTL
"We look at the performance at the company over the last 12 years and the company was averaging a return on equity about 8.6%. Over the last 2-3 years we had some anomalies in the performance of BTL. They embarked on this aggressive path to borrowing and investing in capital and quite frankly there was not the attention that was deserve being paid to net profits, none at all and that is a travesty. We are focusing on that now, because we can't continue to borrow and operate on overdrafts and that kind of thing. We have to make the company sustainable, we have to put sustainable path and more so the country expects and deserve returns on this investment. So the projections that we made was that if we continue at 8% it would take us some 77 years for the government of Belize and the people of Belize to recover its investment. I must say that we were very conservative when we were making these projections too, because we put the cost at 3.5%. If we continued on the path we were on at a 3% return on equity it would have been over 100 plus years. So we had to bring it up and we started at 8%. At 8% it's going to take us some 70 plus years. We can't take that long to get back a return on our investment. And if we gradually move it up to 12% over the next 5 years, incrementally it going to take us some 25 years for the people of Belize to recover from this investment and we think that is absolutely reasonable."