Digicel, the Caribbean-based telecoms company founded by Denis O’Brien in 2001, posted a rebound in earnings in the financial year to March, a period in which the Irish businessman lost control of the telco to a group of bondholders.
Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) rose 7 per cent to $766 million (€707 million), following several years of almost uninterrupted earnings decline, bondholders in a company at the top of Digicel’s corporate tree were told in recent days, according to sources.
Service revenues for the period increased by 5 per cent on an underlying basis to $1.8 billion. Reported earnings and revenues both rose 3 per cent. The trend has continued into this year, with bondholders being advised that Ebitda should grow by 3-6 per cent in the current quarter, the sources added.
A spokesman for Digicel declined to comment on the results.
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A consortium of bondholders led by PGIM, Contrarian Capital Management, and GoldenTree Asset Management seized control of Digicel in January under the group’s third debt restructuring in five years.
A $1.7 billion debt-for-equity swap with the bondholders meant Mr O’Brien’s stake was slashed to 10 per cent. It reduced Digicel’s debt to an estimated $3.1 billion. Total borrowings had peaked at more than $7 billion in early 2019.
Net debt at the end of the financial year stood at $2.87 billion, after accounting for $203 million of net cash on the balance sheet, according to sources.
Mr O’Brien may ultimately end up with as much as 20 per cent of the company, should warrants attached as an incentive to the restructuring end up being triggered if the group reaches a certain equity value with sustained earnings growth.
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Digicel had spent €5 billion over more than two decades building out mobile and other telecoms networks across the business, under the control of Mr O’Brien. This was funded mainly by junk bond sales. Mr O’Brien also extracted at least $1.9 billion of dividends from the group between 2007 and 2015.
The group’s earnings slumped over the following years amid declining voice sales and currency fluctuations across its markets, compounded by economic and political volatility in one of its key locations, Haiti.
While the market in Haiti remains challenging, amid ongoing unrest, Digicel’s operating performance has not deteriorated since earnings in that market plunged in the previous financial year, according to sources. A rally by the Haitian gourde during the reporting period also underpinned earnings in that market when translated into dollars.
Meanwhile, Digicel reached a settlement with the Papua New Guinea authorities in February on a surprise tax bill it was handed in 2022, after selling its former Digicel Pacific division to Australian telco Telstra for as much as $1.85 billion. Papua New Guinea was the unit’s main market.
Digicel was forced to put the equivalent of almost $100 million in escrow in Papua New Guinea in 2022 as the case entered arbitration.
The ultimate settlement meant the Papua New Guinea authorities agreed to refund half of the amount. It is understood that the payment was made after the latest financial year.
The network of markets in which Digicel operates has fallen from 33 to 25 since the Pacific deal. It is now focused on the Caribbean and Central America.
The bondholders-turned-shareholders appointed international telecoms veteran Rajeev Suri as chairman as they took control of the group, succeeding Mr O’Brien. Still, the Irish man remains on the board.
Digicel hired another industry figure, Marcelo Cataldo, as chief executive in April. He was previously head of Luxembourg-based teleco Millicom’s Tigo Colombia in South America.
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