COVID-19 weighed on Digicel, as sales, earnings declined during fourth quarter
Jamaican-based telecoms giant Digicel has seen a sharp decline in its sales and profits weighed down by the effects of the novel coronavirus pandemic.
Digicel’s cash position stood at €445 million at the end of March, while its net debt amounted to €5.36 billion. In an advisory to creditors on Thursday last, Digicel stated that sales and earnings dropped in its fourth financial quarter to the end of March, as the pandemic continued to affect its business.
Digicel, with operations in 32 markets across the Caribbean, Central American and Asia Pacific regions, saw service revenues decline by two per cent to US$538 million (€454 million) on the same period in 2020. The Irish Times reports that Digicel’s Earnings Before Interest, Tax, Depreciation and Amortization (EBITA) fell by three per cent to US$253 million.
Revenues and earnings were affected as many of its markets were hit by severe COVID-19 restrictions, hitting tourism and general economic activity. The Irish billionaire Denis O’Brien-led Digicel has a total of 13.1 million subscribers.
The Irish Times reports that company executives told bondholders on a call that they expect underlying service revenues to rebound by seven-eight per cent on an annual basis in the current quarter. Digicel is forecasting that earnings will jump by 17-19 per cent, buoyed by demand for digital bundle offerings that the company has been pushing.
Digicel still selling its Pacific business
Digicel is still selling its Pacific business spanning Papua New Guinea to Fiji, Samoa, Vanuatu Tonga and Nauru. Late last year, Digicel hired Citigroup to advise on a possible sale of its Pacific business after receiving a number of unsolicited approaches for the unit.
However, sources say a potential deal is set to drag into the second half of 2021, as COVID-19 travel restrictions across the region have made it difficult for suitors to carry out site visits.
The Irish Times says O’Brien offered no clues on the status of talks on the call on Thursday, saying the Pacific unit was “a highly attractive and strategic business” and that he was “very comfortable” with its current performance and status.
He reported that Digicel would not be commenting further unless there was a “notifiable event.” In April last year, Digicel moved to restructure its then unsustainably high-debt level of US$7 billion following years of declines in earnings, resulting in bondholders writing off US$1.6 billion of what they are owed.
The transaction involved the creditors swapping their bonds for securities of a lesser value and has been described by credit ratings agencies as a “distressed debt exchange”. It followed on from another deal struck with some bondholders the previous year to postpone debt repayments.