Caribbean’s second major telco lives to fight another day
Faced with an unsustainable amount of debt, the Caribbean’s second biggest telco (and only major competitive threat to the regional incumbent Cable and Wireless Communications) pulled off a comprehensive restructuring deal that has, for now, allowed it to stave off bankruptcy.
By April 2020, the Digicel Group owed more than $7.4 billion, which is roughly equivalent to the amount it has invested in developing its telecom infrastructure over the years (albeit mostly through debt capital). The group filed for bankruptcy protection in the US, but a proposed restructure of the company’s organisation, as well as a debt-to-equity exchange, saw lenders rally to save it from going down that path — at least for the time being. By June 2020, Digicel had managed to reduce its debt load by $1.7 billion, and the resulting cut in interest payments has meant that its earnings are once again exceeding its outgoings. Nevertheless, the company has considered off-loading its business units in the Pacific in a bid to further reduce its debt pile.
While Digicel has been able to continue to provide uninterrupted services in all of its Caribbean operations, the battle is far from over. The lingering effects of the Covid-19 pandemic (which continues to keep the lucrative tourist market away from the region), and stagnant growth in its domestic subscriber base has meant that Digicel’s earnings have dropped quarter by quarter. Any further declines in ARPU and revenue, coupled with currency depreciation, could tip the balance the other way. A quick-fire sale of assets may then become the next course of action.
Companies mentioned in this report:
Cable & Wireless Communications (CWC), LIME, FLOW, Liberty Global, Liberty Latin America, Digicel Group, Orange Caraïbes, United Telecommunications Services (UTS), KeyTech, Karib Cable, APUA, Setar, Bahamas Telecommunications Company, ALIV, Bermuda Telecommunications Services, Telecom Services of Trinidad & Tobago, ATN,