Digicel bonds slip as debt burden ramps up pressure on company

Quarterly earning fall 9 per cent

Digicel is guiding mid single-digit growth in its earnings for the full year. Photograph:  Peter Andrew Bosch/Miami Herald/MCT via Getty Images

Digicel is guiding mid single-digit growth in its earnings for the full year. Photograph: Peter Andrew Bosch/Miami Herald/MCT via Getty Images

 

The price of bonds for Denis O’Brien’s Caribbean telecoms group, Digicel, slipped on Friday as it emerged that the burden of its $6.7 billion debt pile is increasing, ramping up pressure on the company.

The group has told bondholders that its quarterly earnings fell 9 per cent to $210 million (€185 million) for the three months to the end of March, according to a source.

A Bloomberg report said the company blamed the slide in its earnings on higher customer acquisition costs, accounting changes on bad debts, and the treatment of capital expenditure.

Revenues

Underlying revenues rose 1 per cent to $595 million but reported revenues slipped by 3 per cent to $570 million, partly due to the effects of foreign currency exchange.

Average revenue per user, a standard industry metric rose 4 per cent while data revenues were up 8 per cent. Digicel’s had cash on hand of $279 million, according to Bloomberg

The company is said to be guiding mid single-digit growth in its earnings for the full year to the end of next March, with a debt level of seven times its earnings. Digicel previously set a debt ratio target of 6.7 times earnings for the end of March 2019.

Certain Digicel bonds were trading lower on the markets on Friday, after news emerged of its earnings slide. A more than €1 billion tranche of loan notes due for repayment in 2024 fell in price by more than 1.3 per cent, and were trading more than 10.5 per cent below their level of last July.

Digicel announced in January that close to 98 per cent of the holders of $2 billion of bonds due for repayment next year had agreed to delay repayment until 2022, as it grapples with its debt burden. It raised $600 million in another bond sale in March. The group was unavailable for comment last night.

Digicel was founded by Mr O’Brien in 2001 and now operates in 32 markets across the Caribbean, Latin America and Pacific regions. In recent years, however, the group has grappled with the sheer scale of its debts.

Programme

Digicel is now more than two years into a transformation programme, initially known as Project Swan and officially named Digicel 2030 Global Transformation upon its launch early in 2017. The group pledged to cut staff numbers by 25 per cent, offload assets and restructure its operations.

In recent weeks, the company has been at the centre of a bizarre row with the government in one of its island markets, Antigua and Barbuda. Prime minister Gaston Browne has effectively threatened to nationalise Digicel’s local operation, following a dispute over the company’s refusal of a state order.

The government demanded that Digicel and its competitor, Flow, relinquish some of their spectrum to another, state-owned rival, APUA, which also doubles as the market’s regulator.

Digicel has obtained a local court injunction preventing the Antiguan government from confiscating any of its spectrum. – (Additional reporting: Bloomberg)