Denis O'Brien's bid to own one of Italy's largest mobile phone companies is being hatched outside the Digicel Group, the emerging markets-focused company he founded a decade and a half ago.
The billionaire is using the Digicel name as he circles assets being sold off as Hutchison Whampoa, the Hong Kong owner of Three Ireland, and Dutch operator VimpelCom seek EU regulatory approval to merge their Italian units.
However, any offer would be under an entity separate to the Bermuda-based Digicel Group and would not draw on company finances, Digicel chief executive Colm Delves told The Irish Times yesterday, confirming comments made recently to the firm's bondholders. He was commenting as the Digicel Group revealed its full-year sales and earnings dipped in the year to March amid currency weakness in several of its markets.
Mr Delves declined to say how Mr O’Brien would finance an Italian deal, other than to say: “Denis has access to a lot of funding.”
Under an agreement between Mr O’Brien and Digicel, he can use the brand name outside of North, Central and South America, the Caribbean and South Pacific.
VimpelCom and Hutchison are planning to sell up to 8,000 mobile towers, covering most of the Italian population, and wireless spectrum to win Brussels’ approval for a €21.8 billion deal to create the country’s largest mobile phone operator by customers.
Italian broadband provider Fastweb and French phone company Iliad may have an edge over Mr O'Brien in securing the assets, the Financial Times reported last week.
Meanwhile, Digicel Group said its earnings before interest, tax, depreciation and amortisation fell 1 per cent to $1.165 billion in the year through March amid unfavourable foreign exchange rates.
Stripping out currency fluctuations and start-up losses relating to the roll-out of fibre-to-the-home services in the Caribbean and a TV service in Papua New Guinea, Ebitda rose 9 per cent.
The negative impact of some emerging market currency movements against the dollar had since abated, Mr Delves said.
The group’s total debt dipped to $6.36 billion at the end of March, Mr Delves said. That is down from $6.49 billion a year earlier, but up significantly from $4.9 billion in 2012. Digicel had about $190 million of cash on the balance sheet at the end of March, following heavy spending on its networks, he said.
In October, Mr O’Brien pulled a planned initial public offering of Digicel shares, in which the company was seeking to raise up to $2 billion to help lower its debt mountain, expand its operations and list on the New York Stock Exchange. The group blamed volatility in the US and global markets at the time.
“I think, particularly where markets are at the moment, [a flotation] is not something we’re planning or anticipating in the near-term,” he said.
While Mr O’Brien said in May that he did not expect to make another attempt to float the business for 12-18 months, Mr Delves said the company will remain “opportunistic”.
“If it does make sense in 12 to 18 months, we could go for it,” he said.
It emerged in April that Mr O’Brien had started in the second half of 2015 to waive his $10 million-a-quarter cash dividend payments until business improves. The company’s number of subscribers in the last financial year rose by 1 per cent to 13.8 million.