KeyTech Ltd. spent nearly $3 million on staff separation expenses in the six-month period through September as it trimmed its workforce, the company revealed yesterday.

The group, which owns the Bermuda Telephone Company, M3 Wireless and Logic Communications, announced plans in March to trim its BTC workforce by around 25.

KeyTech said its profit for the six months was $3.22 million. Excluding the $2.99 million laid out on staff separation expenses, net income was $6.2 million compared to $7.13 million for the same period last year.

“We have seen the impact on consolidated revenues of lower domestic demand and continuing cost reduction measures by our customers,” said KeyTech CEO Sheila Lines.

“Anticipating these trends we focused on delivering customer service to maintain our market shares and on lowering our operating costs through tight control of operating expenses and reductions in staff numbers.”

The company also announced substantial capital spending plans for next year, though it added that the nature of this would depend on policy choices made by Government.

Regulatory reform of the telecommunications industry is set to be carried out, bringing down most of the licensing barriers that currently restrict the services competing companies can offer.

“We are developing a major capital programme to improve speed and reduce operating costs driven by faults in our Bermuda fixed line network by expanding our fibre plant,” Ms Lines said. “We anticipate commencing this substantial capital investment programme in 2011.

“A critical element in our decisions to invest in new infrastructure will be policy choices the Government makes. Therefore we continue to provide information to the Government regarding our plans and to highlight those factors that can accelerate this investment which will enhance Bermuda’s core communications infrastructure.”

KeyTech felt an impact from the difficult economic climate, as use of its services declined and operating revenues fell 8.6 percent to $52.65 million compared to $57.6 million in the same period last year.

Wire line local voice revenue continued to decline as customers increasingly relied on wireless and data messaging services for personal and business communications, KeyTech said.

Cellular voice revenues decreased due to increased handset subsidies, increased licence fees and reduced roaming revenues. Hardware and consulting revenues also declined as customers reduced expenditures.

Including staff termination costs, total expenses decreased $589,281 and excluding staff termination costs expenses decreased $3.57 million, due to a number of cost reduction initiatives. Total expenses for the period were $51.11 million compared to $51.7 million for the same period last year.

During the six-month period, KeyTech invested $6.64 million in capital assets compared to $6.18 million during the prior period.

Ms Lines said: “We have continued to invest in our network assets to deliver quality service to customers and to enhance our data capabilities. Data revenues have proven to be the most resilient in the face of lower economic activity.

“In December we will complete an expansion of our cellular towers which will substantially increase capacity and improve service quality in our 3G network. As part of this upgrade we will be offering 3G+ service in 2011.

“In Cayman we commenced deployment of fibre in George Town and we expect to complete this network expansion by March 2011.”

In June 2010 KeyTech increased its ownership in WestTel, its Cayman subsidiary, to 100 percent and in November 2010 WestTel re-branded to Logic Communications. The transaction resulted in a charge to retained earnings of $1.1 million, representing both the non-controlling interest in the balance sheet on the date of acquisition and the cash consideration for the remaining common shares.

Equity earnings in affiliates for the six month period were $1.57 million compared to $1.1 million in the prior period due primarily to growth in earnings from Bermuda CableVision.

Basic and fully diluted earnings per share for the six month period ended 30th September 2010 were 22 cents compared to 49 cents for the same period last year.

Investment income and realised gains and losses from marketable securities for the period were $17,173 compared to a loss of $85,507 for the prior period.

The company declared a dividend of 12 cents per share for the quarters ending June 30, 2010 and September 30, 2010.