WHY HAVE TWO SYSTEMS?BTL Chairman reiterates ‘business case’ for SpeedNet acquisition

Belize Telemedia Limited says its network can accommodate approximately one million users but currently serves only 225,000—a capacity gap at the centre of its business case for acquiring Speednet.

BTL Chairman Markhelm Lizarraga says adding Speednet's approximately 100,000 customers would still leave the combined customer base using only slightly more than 30 percent of BTL's existing network capacity.

That calculation formed one of the more detailed explanations provided to date of the commercial rationale behind BTL's proposed $80 million acquisition of the company operating the SMART brand, as Lizarraga and BTL Chief Executive Officer Ivan Tesecum fielded questions from members of the media following a presentation to Cabinet. These points have formed the principal arguments of the company and remain unchanged from what it explained earlier this year in interviews with The Reporter.

While public discussion surrounding the proposed acquisition has focused heavily on competition, regulation, political connections and the process by which the transaction is being pursued, BTL is making a fundamentally different business argument: Belize's telecommunications sector has significantly more infrastructure than its relatively small customer base requires.

"Picture this. We have a system that can do a million people. Our system is only holding 225,000. Smart has 100,000. Even after consolidation, we'll only be using 30-something percent capacity of our system. Why have two systems?" Lizarraga said.

BTL's proposition, therefore, is not principally that it needs Speednet's physical infrastructure. Rather, the company says it can place Speednet's customer base onto infrastructure that BTL already owns, converting unused capacity into additional revenue while simultaneously eliminating some of the costs associated with maintaining two national telecommunications networks.

Lizarraga described the industry as overcapitalised, pointing to the duplication of fibre, towers, power systems and other telecommunications equipment across a relatively small domestic market. He noted that telecommunications equipment is expensive and can become outdated within five to seven years, meaning both companies must continue investing in parallel infrastructure.

The chairman later distilled BTL's valuation argument further. "The assets are gravy, right? The real value to us is using the excess capacity and becoming more efficient as an industry. Why run systems that could do 2 million people when the country only has 300,000 people?" Lizarraga said.

That distinction also helps explain BTL's response to criticism that it has reviewed only one year of Speednet's audited financial statements.

Lizarraga confirmed that BTL received one year's audited financials. However, BTL argues that its valuation is substantially concerned with the future cash flows that Speednet's customers could generate once brought onto BTL's existing network rather than simply valuing Speednet based on its historical financial performance or physical assets.

Tesecum said BTL can independently assess aspects of Speednet's customer activity because the two networks are interconnected. According to the CEO, BTL can observe traffic moving through its switches, identify categories of customers and use traffic patterns alongside its own average revenue-per-user figures to estimate the revenue potential of Speednet's subscribers. BTL's calculations therefore rest on two potential financial benefits: additional revenue from approximately 100,000 customers and lower costs from consolidating duplicated infrastructure.

The company also argues that some duplicated towers and other infrastructure could be redeployed into parts of Belize where service remains limited. That could allow BTL to expand its geographic footprint and potentially generate further revenue without purchasing entirely new infrastructure for those areas.

The negotiated purchase price currently stands at $80 million, subject to final due diligence. BTL estimates that the transaction could pay for itself within approximately 4.2 years, an estimate Lizarraga said has been substantiated through three separate valuation exercises.

Lizarraga also said repayment of the financing would come from efficiencies generated within the combined operation, particularly through greater utilisation of BTL's existing excess capacity. The chairman linked those efficiencies to BTL's longer-term strategy. After completing a five-year plan covering 2020 to 2025, he said the company began examining how it could continue improving returns while meeting future investment requirements.

BTL is also seeking to transition beyond the traditional telecommunications model into what Lizarraga described as a "techco," with greater involvement in cloud computing, cybersecurity, data centres and other technology services. Such areas, he said, will require further capital, specialised employees and continued infrastructure investment.

The excess-capacity argument does not, however, settle the broader debate surrounding the acquisition.

Whether consolidating the two principal mobile operators would sufficiently protect competition, whether the regulatory framework can safeguard consumers, and whether governance concerns surrounding the transaction have been adequately addressed remain separate questions from whether BTL can demonstrate a commercial rationale for pursuing the acquisition.

The Prime Minister's family connection to Speednet has also contributed to public scrutiny. Asked directly about that issue, Lizarraga acknowledged that a political dynamic surrounds the proposal but maintained that BTL's board is treating it as a business transaction aimed at improving returns and services. The transaction also remains subject to regulatory approval. Lizarraga said BTL is continuing its due diligence and has not reached a final agreement, adding that the company would need approval from the Public Utilities Commission before proceeding.

BTL has argued that continued PUC oversight, alongside restrictions on price increases, would provide safeguards for consumers. Management also contends that eliminating duplicated expenditure could create room for lower prices, although whether those projected efficiencies ultimately translate into savings for consumers would remain a key regulatory consideration.

At the centre of BTL's business case, however, is a comparatively simple proposition: the company says it has built and paid for a telecommunications network capable of serving roughly one million users but currently has only about 225,000 customers using it. The proposed acquisition would add another approximately 100,000 customers to that existing infrastructure, while BTL says consolidation would reduce the cost of maintaining two substantially duplicated networks.

Whether those projected benefits justify an $80 million acquisition—and whether they outweigh the competition and governance concerns surrounding it—now forms part of the larger question facing regulators, policymakers and ultimately BTL's Belizean shareholders.