The Bahamas is edging towards opening up its telecommunications sector, with the government’s plans to sell off a controlling stake in state-owned Bahamas Telecommunications Company (BTC) having taken another step forward in late November.

Having announced in January that it was opening a tender to sell off a minimum 51% stake in BTC, in July the government invited interested parties to register their interest in the privatisation tender. Though it has not publicly announced a price on the controlling interest in BTC, analysts say the government would be looking at generating $200m or more from the sale.

Prime Minister Hubert Ingraham has said the government intends to use the funds from the sale to help pay off some of the state’s debts, which have become a more pressing issue as the global economic crisis has seen revenue fall.

Currently BTC serves 334,000 wireless, 132,000 fixed-line and 18,500 broadband subscribers, as well as having an extensive catalogue of roaming agreements with 190 other service providers to meet the needs of the millions of visitors who come to the Bahamas annually.

While only a small operator by global standards, BTC is a profitable one, though like many companies in the sector it has seen earnings fall as a result of the global recession. In 2008 BTC posted a net profit of $21.1m, just under half of its result from the preceding year, with two-thirds of its profits coming from cellular services.

One of the appealing aspects of the BTC sale is the firm’s monopoly on the telecommunications market, though this attraction will subsequently be diminished by the government’s plans to expand the domestic market by introducing competition. Indeed, BTC will only be given two years in which to enjoy its exclusive status before having to face competition from two new mobile phone network licences awarded to new players.

According to local media reports at the end of November, at least six potential bidders lodged expressions of interest, though the committee tasked with overseeing the privatisation process deemed that only four be invited to progress to the next phase of the sell-off.

As it stands, UK-based communications firm Vodafone and One Equity Partners (OEP), JPMorgan Chase’s private equity arm; Digicel Limited; Atlantic Tele-Network; and Trilogy International Partners are the four bidders still in the running to become the majority shareholder in BTC.

Initially, the government had said it wanted the privatisation completed by the end of 2009, though now it appears the sales process will continue well into the new year, given the need for due diligence to be completed before full bids can be submitted.

The current privatisation process is not the first time that the Bahamas has tried to sell off a stake of its state-owned phone company, with the most recent attempt being in 2003. The process was called off after none of the three bids received came close to the valuation placed on the stake put up for sale.

Another reason given for the failure was that the sale had not attracted a top-flight service provider as a credible bidder. At least this is not the case this time around, with Vodafone one of the world’s largest telecommunications companies and Atlantic Tele-Network, Digicel and Trilogy all active in the Caribbean region and beyond.

Another advantage is that the Bahamas is better prepared to deal with a private telecommunications market. As part of the process of opening up the sector, the government has constituted an independent body to oversee the industry. Under legislation that came into force in mid-September, the Utilities Regulation and Competition Authority (URCA) is charged with having regulatory responsibilities for telecommunications, internet services, radio and television broadcasting.

On November 19, while attending a meeting of the URCA’s board, the deputy prime minister and minister of foreign affairs, Brent Symonette, said the authority would work to ensure that consumer interests are safeguarded, and sustainable competition is encouraged and supported.

“I feel that the entire Bahamas will benefit from this new regulatory body that will oversee the electronic communications sector in our country,” he said.

Having attracted the interest of some major players, and having put in place a regulatory regime to oversee the sector, now all the Bahamas needs to do is seal the deal in order to ring in a new era for telecommunications.

As Latin American economies begin to bounce out of recession, business services firm Cognizant is taking action & forecasting up to 5% of global revenues from this growth market.

Although LatAm accounts for less than 1% of current global sales, Cognizant (Nasdaq: CTSH), is looking for the region to contribute up to 5% of total revenues (or $160 million) within three years. To accomodate this jump, the IT services company is looking to implement shared regional service centres.

A number of key drivers are pushing this strategy, including common language, rapid economic growth in the region & an appetite for a return to outsourced services, particularly in BPO. Cognizant already has service centres running in Mexico & Argentina, with a new centre planned to be opened in Brazil in early 2010.

Business News America reports a company official as saying :

“We have an expansion and business development plan for the region. The centre in Brazil will focus on developing the domestic market. It will not affect development at the centre in Argentina, which will have multiple foci while serving global accounts.”

“The situation in Mexico will be a mix. In some cases for specific services like BPO, services will be offered from Mexico. The office will also serve the local market”

“What we are seeing is that many multinational companies with presence in the region are following a trend of optimizing their costs through the construction of regional shared service centers. At the same time, there is a trend towards seeking a strategic partner, such as Cognizant, to help them develop those centers.”

Cognizant recently reported impressive results for the third quarter 2009, with net income rising to $136.6 million,, up from $112.8 million, in the third quarter of 2008. It would seem that it is one of the few companies that have benefited from the recession, as multi-nationals are keen to move to managed services & outsourced application support.

As the Latin American economies, led by Brazil are set to grow at faster rate than their G20 counterparts, at least for the next few years, see HP expands ProCurve operations,  it looks as though we are going to see a number of announcements like this coming in the near future.

Hewlett-Packard

“We know we will be using a direct and indirect sales strategy as the ProCurve product line is extensive, and in some cases allows for both sales models,” said Alfredo Yepez, who manages HP’s Lat-Am Enterprise Storage & Servers operations. “Many of our channels today have some type of specialization in the networking area as they have previously distributed solutions from our competitors and are interested in representing ProCurve. So we will leverage the relationship with our current partners that have experience in the networking business as a first step, and then develop other partners in a second stage”

The company has recently lunched HP ProCurveOne, which is a flexible suite of applications from leading ISV’s, including Microsoft,Avaya, McAfee, F5 and Riverbed, that can be integrated into the existing architecture of Enterprises, with management being provided by a central platform.

The new approach from HP (Nasdaq:HPQ) seems likely to pay off, as Felipe Ortega, Manager ProCurve of the recently opened R&D centre in Costa Rica reported, even without selling solutions across Latin America, the company has managed to become the second largest provider of networking products globally, after Cisco (Nasdaq: CSCO), in terms of both revenue & market share.

“We are also developing high-speed chips for networks, software solutions for management and connectivity monitoring of large datacenters. The fourth area is networking security for both wired and wireless networks,” he added.

Overall revenues were up 7% to US$856mn compared to US$800mn a year ago. However, top line figures have been heavilyimpacted by the dollar exchange rate across all of it’s markets, resulting in a 9% negative translation impact, the company said.

EBITDA has  increased 13% to US$392mn year-on-year, while  margin was 45.8%, up 2.6% compared to Q3 as a result of cost control initiatives and strong growth in higher margin Value Added Services (VAS) revenues. In Central America, Millicom’s Tigo brand returned a margin of 55.2% and in South America the margin increased to 40.7%.

Speaking during a conference call with investors, Millicom’s CEO Mikael Grahne said the company had seen a lower level of customer intake in Central America, reflecting high voice penetration and an increasing focus on higher value customers and Value Added Services.

For the group, VAS revenue was up an encouraging 46% in the quarter in local currency terms and represented 19% of recurring mobile revenues. Demand for 3G services remains high in Latin America, especially for datacard customers. Paraguay represented the best market overall for VAS, where it brought in 30% of mobile revenues. Grahne said that in the long term, the company is aiming to have VAS represent an average of 25% of revenues across all markets.

In Central America, Honduras grew its customer base 11% year-on-year despite the entry of a third operator Digicel in late 2008. Guatemala grew its customer base by 19% and El Salvador 10%. Net additions were lower in Central America resulting from a combination of high penetration, weaker economic conditions and an increased focus on high quality customers, the company said.

In South America, total customers increased by 17% year on year, with Bolivia surging 47%. In Colombia, the increase was 9% and in Paraguay 12%. Constant currency ARPU in South America was up 2%, while in Central America it fell 5%. This was mainly a result of lower ARPU in Honduras, which was negatively affected by a new regulatory tax on international inbound traffic and continued promotional activity by competitors.

Grahne said that capex for 2010 would be US$700mn, US$50mn of which is held over from 2009. Though not giving a break down, Grahne said that capex in Central and South America would increase in 2010 as the company steps up investment in 3G capacity and coverage.

Millicom’s internet and TV assets that it purchased last year, Amnet and Navega, saw a sequential decline in EBITDA margins to 43% from 45% of revenues in Q2, which Grahne attributed to restructuring changes since the acquisition, but forecast that the margin would rise over time. Millicom also expects capex for Amnet to be lower in the medium term as the company focuses on increasing customer penetration with its existing footprint, rather than extending coverage.

Emerging markets have lower data center investments…Are they more fit to consume cloud services? Can we use the same tactics to reach them?

Over the last 18 months I’ve been working on enabling the “cloud software services” transformation for Microsoft Latin America. The journey has been harder than expected:

• Customers. As in any other region of the world, you will find early adopters, late majority and skeptics. Academic institutions are leveraging free e-mail offers faster than any other segment, but when provided to them as cost reduction only. The collaboration market for consumer is there, but for enterprises still focused on the interior.
• Latency. Most governments require that at least their data is kept in-Country… if you target private organizations, most US data centers can effectively cover Mexico, Central America and the Caribbean. For all South America you will need to invest on a hoster partner to effectively deliver services. Be prepared to extremely low upload speeds.
• Local billing is simply not there. “Software services” can generate tax issues that make it a lot more expensive. Billing is a complex issue for small and medium size organizations that do not use international credit cards. They are also bad for SaaS providers, impacting 15-25% of the total “per user” cost.
• Marketing. The Social media is just starting to develop on emerging markets, you will need to promote using traditional media and existing partners or might not reach critical mass. Expect promotion cost to be higher than expected, because targeting is still limited.
• Partners. Business is conducted on different ways on each Country. Most customers are not ready to buy direct. This is a huge challenge because intermediaries expect to make a significant “traditional” margin. If your service is free then the problem you face is volume.
• Do you plan to use online support? Sorry, Latin America organizations demand phone support… The lower costs of HR make it possible and desirable.
• Internal Incubation. Most software organizations cannot afford the incubation process required to initiate the motion of software services sale, they rely on their existing workforces.

For Microsoft, 2007-2009 was a period to establish hundreds of partnerships that will make it possible to offer the choices to customers: internal, partner or vendor hosted mixed services. The vertical and horizontal application still need the “multi-headed” treatment so that they can be consumed by a smart client, browser or a mobile device.

The vision of getting access to your information from any device and on any place – including emerging markets – is becoming real, but will take at least 5-10 more years before it becomes truly global.

Reproduced with the kind permission of Luis Daniel Soto, who is Senior Director of New Technologies, in Latin America for Microsoft