JAMAICA: Flow Jamaica has a $45b tax cushion - EntornoInteligente

Jamaica Gleaner / Cable & Wireless Jamaica, which trades as Flow Jamaica, has amassed a tax arsenal of nearly $45 billion, resulting from losses racked up by the telecoms over several years.

Financing charges linked to a debt of $60 billion owed to its immediate parent Cable & Wireless Communications, and a consistent writedown of assets, have curtailed profit at the Jamaican telecoms, leading to an accumulation of massive deficits that now top $48 billion.

The company disclosed in its newly released annual results for year ending December 2017 that it now has $44.8 billion of tax losses available to offset against future profit, subject to agreement by the tax commissioner.

Flow is yet to respond to requests for comment, but has noted in its earnings report that tax losses “are not subject to expiration, but may only be utilised to the extent of 50 per cent of each year’s taxable profits”. The Financial Gleaner was unable to find any comparable cases of such a massive tax cushion.

One of the experts polled for this story said Flow could utilise the taxation losses to avoid higher taxes in the future, but noted that with its heavy non-cash charges over the years, the telecoms is unlikely to enter a sustained period of profits. Another expert disagree, saying the telecoms would likely start utilising the tax losses this year, because of savings on interest rates and a rise in its annual revenues.

Flow noted in its earnings report that the Tax Commissioner and Tax Administration Jamaica would guide how the tax losses are used.

In its financial year ending December 2017, Flow Jamaica made an operating profit of $5.02 billion, but it was all consumed by $5 billion of debt financing charges on loans owed to CWC entities.

Amid its disclosure of the multibillion-dollar tax cushion, the company paid corporate income taxes of $245 million for the year, which helped to push it further into red. The resulting net losses of $383 million totally erased the $261 million profit reported by the telecoms for 2016.

Revenue, however, was a bright spot for the telecoms – rising nine per cent from $25 billion to $27 billion, primarily due to growth in the mobile segment.

During the year, Flow initiated three measures to further its long-term goal of becoming the ‘market leader’: expanding its fixed line coverage to remote rural communities; restoring areas with vandalised infrastructure; and increasing Internet speeds on mobile and fixed networks.

“Consequently, we welcomed thousands of new customers to our network, driving total revenue growth of 9.0 per cent …,” said Managing Director Stephen Price, while particularly citing revenue growth of 18 per cent for mobile and 11 per cent for broadband, in his statement prefacing the financials.

Mobile earned $14.9 billion; broadband and video, at $3.1 billion; fixed voice, $5.4 billion; and managed services, $3.6 billion.

The 2017 financials are likely to be the last set publicly released by the telecoms, assuming it follows through on plans to delist the stock after the buyout of minority holdings at $1.45 per share through CWC Cala Holdings.

Trading of the CWJ shares were suspended on Monday, March 5 to March 22, to allow for the transfer of shares tendered in the offer for three billion shares, which closed February 28. The company is yet to disclose the size of the take-up.

Prior to the bid, CWC controlled 82 per cent of Cable & Wireless Jamaica.

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JAMAICA: Flow Jamaica has a $45b tax cushion

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