Increased Competition Pushes TSTT into First Ever Loss

Telecommunications Services of Trinidad and Tobago (TSTT) has issued a profit warning, advising that it will likely declare a first ever post-tax operating loss. The Company's current preliminary estimate of this loss is TT$122 (US$19.8) million for the financial year ended March 31, 2007 as compared to a post tax profit of TT$261 (US$42.4) million for 2005-2006.

The 2006-2007 Financial Year was significant for TSTT in several ways. Unlike incumbent operators in most newly-liberalized markets, the company retained significant leadership in the mobile market by nearly doubling its mobile customer base to over one million customers. However with its aggressive response to competition, the company incurred a substantial increase in operating costs, reflected in its current financial results.

TSTT maintained significant gross revenues - TT$2.877 billion (US$468 million) - for the 2006-2007 Financial Year, a slight decrease from the TT$2.933 billion (US$477 million) gross revenues reported for 2005-2006. Gross revenues, therefore, remained relatively flat, even in the face of increased competition. A major portion of this decline in revenue can be attributed to price erosion in the international long distance market.

TSTT's focus on defending its revenue streams and expanding its mobile customer base led to a TT$311 (US$50.6) million increase in customer acquisition costs. In addition, TSTT experienced several other exceptional expenses contributing to its operating loss.

The company also says that it has lost over US$16 million to international roaming fraud, prepaid fraud, and bad debt.

"While I have been here only a short time, I can speak for all TSTT employees when I say that we are not satisfied with these results. The difficulties that we are facing are no more than to be expected in the early stages of a liberalizing market," said newly appointed Chief Executive Officer Roberto Peon.

The market was opened to competition last year when Digicel Group entered the country.

TSTT is 51% owned by the government and 49% owned by the UK based Cable and Wireless."

Posted to the site on 29th May 2007