In the year ended 31 March 2019, Botswana Telecommunication Corporation Limited (BTCL) splashed P349.34 million purchasing property, plant and equipment. The expenditure was an increase from P277.4 million in the past period.
Net cash used in investing activities came to P437.8 million, edging closer to half-a-billion from P278 million the prior period.
Cash and cash equivalent at the beginning of that year stood at P450 million, having reduced to P305.4 million as BTC dipped into its pockets for innovative and digital investments. During that year, BTC had made investments in network technology, modernisation of IT Enterprise systems, rolled out relevant and impactful products, and expanded to 4G (LTE) network, to name but a few.
Accordingly, to support its technology transformation, more than 85 percent of capital expenditure was spent on transformative projects such as the LTE and Fibre to the “X” (FTTx) rollouts, the Converged Billing System and the Data Centre. Previously the company had never spent over P300 million, which was a concern to some observers about the company’s sustainability. Experts argued that it comes down to whether all investments that BTC was making were to generate the company more money. The problem for the company would be if the projects took longer to generate such money.
Pundits argued that this would have meant that BTC has been spending more than how much it can replenish, technically known as cash burn ratio. But at that time, BTC MD Anthony Masunga was confident that the telco was investing in assets which would generate cash, although there was no specific guidance of expected impact. Experts were particularly concerned, given that over the years that Masunga has presided over the company, profit had been declining non-stop. During the year when such massive investment was made, BTC had recorded a profit after tax of P162 million, a decline of 25 percent compared to P217 million recorded in the previous year. This was partly attributable to an 8 percent decline in total revenue to P1.4 billion.
In the next year, BTC was to focus on monetising the network from a commercial perspective which would deliver the financial objectives, riding on the telco’s new digital and connectivity capabilities, whilst exploring new ways to leverage these capabilities and develop additional ones.
Although others argued that BTC still had room for investment, this had to be done cautiously, given that profit growth was perennially on the downside. In terms of investments, the telco saw a slowdown capex the following year coming down. Purchase of property, plant and equipment amounted to P200 million in the 12 months ending 31 March 2020 with net cash used in investing activities rounding up to P210 million in total.
From a financial performance perspective, revenue was almost flat, declining by 2 percent in 2020 from the previous period. But the company defended this negative growth, saying it was in line with market trends as customers switched from voice calls to data. BTC collected most of its revenue from its voice as the only service provider of fixed voice. It said the decline was a result of a shortfall in voice revenues for both fixed and mobile in the latter part of the year. As that happened, the company said broadband services grew at double digits, reflecting superior fixed and mobile data network performance offerings to customers through reliability, speed and coverage.
This was against the background of completion of the rollout of major capital projects such as the Data Centre, Fixed Broadband and Mobile Broadband (4G). But the touted performance of the broadband services was not enough to make up for the shortfall of the voice revenues, a segment which has been key to the telco’s profitability.
Profit fell by 28 percent to P116.7 million after investments also led to an increase in depreciation on network assets. In that year, P117 million was spent purchasing property, plant and equipment. Cash and cash equivalents at the end of the year stood at P119.7 million before bouncing back to P363.8 million. The growth, according to Masunga, was helped by a cash conversion ratio of 52 percent as well as favourable working capital resulting from implementation of debt collection measures during the year. The telco has been on aggressive collections, which has seen the company’s net cash from operating activities increase to P545.4 million. In essence, this, coupled with cost reduction strategies, has boosted profitability of the company in the 12 months ending 31 March 2021.
Masunga says the healthy cash balance enabled BTC to finance further expansion of its mobile data network and replacement of traditional copper network with fibre in order to support the needs of its customers. During the period under review, BTC spent almost P200 million on purchasing property plant and equipment.
It is important to note that in 2021, while significant investments are being made, revenue has remained flat or little grown. The Group has reported revenue of P1.43 billion, which is a 1 percent increase compared with the prior year. This increase in revenue was driven by the monetisation of significant investments in fixed and mobile broadband infrastructure in support of high speed Internet service at homes and offices across most parts of the country, according to Masunga. “The uptake of our data products has been increasing with the improving quality of service leading to increased revenues as voice revenues flatten/decline,” he says. “Profit for the year increased by 15.8 percent to P135 million as the company reined on costs.”
Masunga says looking ahead into the new financial year, BTC’s focus will be on streamlining efficiencies throughout the business. “We will continue to keep a tight rein on our costs coupled with smart capital expenditure investments,” he says, adding that in line with the evolution of business, one of the key focus areas will be digitalisation throughout the business as well as automation of key processes.
In anticipation of increased adoption by more businesses of innovative digital solutions to sustain their performance, Masunga says BTC has positioned itself to be the anchor in delivering digital solutions to its customers through its wide, high speed data connectivity network, cloud-based services and superior customer service.