Keith Collister, Contributor
O'BRIEN
CHAIRMAN AND majority shareholder Denis O'Brien and Digicel's new Group CEO Colm Delves are currently on an international roadshow in London and New York with the goal of raising U.S. $250 million to help fund their company's Caribbean expansion.
The company has confirmed that it is in the process of raising additional capital through a bond offering to help finance its growth plans. Digicel intends to raise the bond financing from international investors through investment banks Citigroup and J.P. Morgan.
"These resources will be employed to rapidly expand services in Trinidad and Tobago," Digicel advised. The funds are also intended to repay unsecured and shareholder loans, and to integrate recently acquired Cingular Wireless assets elsewhere in the Caribbean and Bermuda.
MARKETS
Digicel currently operates in Jamaica, Barbados, St. Lucia, St. Vincent, Grenada, Curaçao, Aruba, and the Cayman Islands. The company is also preparing to launch service in Trinidad and Tobago, has acquired a licence for a GSM network in Haiti, and has recently agreed to acquire U.S. Group's Cingular's Caribbean wireless assets.
This acquisition brings new markets to Digicel in Bermuda, Anguilla, St. Kitts and Nevis, Antigua and Barbuda, and Dominica, as well as strengthening its market shares in the Cayman Islands, St Lucia, Barbados and Grenada, bringing the total number of markets it operates in to 15.
Digicel's total group revenues amounted to U.S.$478 million for the year to last March, a 45 per cent increase on the previous year. Digicel finished fiscal 2005 with 1.722 million total subscribers (97 per cent pre-paid), and an estimated aggregate Caribbean market share of 66 per cent. Earnings before interest, taxation, depreciation and amortisation (EBITDA) were US$155 million, which using the standard valuation multiple for mobile firms of six to seven times EBITDA would value Digicel at approximately $1 billion on a debt free basis.
International Rating Agency Moody's Investors Services has assigned a B1 local currency corporate family rating to Digicel Ltd. and a B3 rating to its proposed issuance of US $250 million of senior unsecured notes, with a positive rating outlook.
SIGNIFICANT OVERLAP
Due to the significant overlap of the Cingular assets with existing Digicel operations, Moody's believes Digicel should be able to improve their profitability. Consequently, Moody's has assigned Digicel a positive outlook to its ratings signifying that the ratings are likely to move higher within the next 18 to 24 months.
In Moody's view, Digicel's rating is supported by very strong results from the company's primary operating subsidiary in Jamaica, the similar success of Digicel's growing operations in other Caribbean islands, the relatively low leverage of the company as measured by total debt to EBITDA, and Moody's opinion of the good free cash flow generating ability of the company.
International rating agency Fitch agrees with Moody's positive assessment of Digicel, having also assigned a rating of 'B' to Digicel Limited's senior unsecured debt, including the proposed US$250 million senior notes offering due 2012 with a stable outlook.
Fitch comments "In fiscal 2005, Digicel Jamaica represented the vast majority of EBITDA from its six core operating units; Jamaica should decline to approximately 60 per cent to 65 per cent by 2008 as newer operations start up and mature, primarily from its Trinidad and Tobago operation scheduled to start up later this year."
