Digicel says cost-cutting plan and growth will reduce company debt
Irish-owned telecoms and communications group Digicel has rejected a suggestion its debt is too high.
The business is active in 32 markets across the Caribbean, Central America and the South Pacific. It has 13.8m subscribers across its markets, for services from mobile to cable TV and broadband. But this year's strengthening of the dollar has hit the group, because it borrows on the markets in US currency but makes its money in a mix of local currencies in the markets where it trades.
According to a report in the 'Irish Times', an analyst at US credit research firm CreditSights said Digicel debt is at an "unsustainably high level" at 6.2 times earnings.
In contrast, analysts at Barclays Bank this month reiterated their "overweight" rating on Digicel's bonds, a signal investors should hold relative high levels of the debt.
CreditSights analyst Michael Chakardjian, reportedly made his assessment at a conference in London. Last night a spokesman for Denis O'Brien-owned Digicel said the company rejected that view.
"Digicel fundamentally disagrees with the conclusions of the report. Digicel's outlook remains positive with robust plans to de-lever by monetising our network investment and through realistic cost management initiatives."
The company is understood to have told bond market investors in November that it plans to reduce its debt ratios to 4.5 times earnings by the end of March 2019 as it benefits from €2.3bn invested into its networks and services. Its also cutting costs across the business.
The plan, dubbed Project Swan, includes streamlining back office functions and technology across the far- flung group to maximise efficiencies.
Barclays said 2017 will be a "transformational year" for Digicel. The cost-cutting plan is tipped to add 2pc to 4pc to the group bottom line, while new revenue from business services and mobile data will also boost the business.