Regional telecoms company Digicel saw its earnings marginally fall to US$249 million for the second quarter.
According to Bloomberg, Digicel’s debt levels now stand at 6.9 times earnings before interest, tax, depreciation and amortization (EBITDA). This is a move in the right direction coming from a level of 7.3.
Digicel saw a nine per cent uptick in cash flow derived from operating activities as it continues to reap rewards from its data business. This arm’s revenues has now surpassed that of its once core business, voice on mobile handsets.
“Fitch expects that Digicel will have to restructure debt at multiple levels in the next 12-18 months, due to the Group’s unsustainable capital structure and imminent refinancing risk.”– Fitch Ratings
Bloomberg is reporting that for the quarter under review, Digicel has US$180 million in cash, a decline from the US$214 million reported in the previous quarter.
Leading rating agency Fitch is concerned about Digicel’s ability to finance its huge debt of US$7 billion from what many analysts see as lacklustre operating performances.
“The most immediate concern is Digicel’s US$1.3 billion notes maturing in April 2021, which Fitch believes the company will struggle to refinance amid stagnant operating performances.
“Fitch expects that Digicel will have to restructure debt at multiple levels in the next 12-18 months, due to the Group’s unsustainable capital structure and imminent refinancing risk.”
Makhulu noted: “One of the factors affecting Digicel is the volatility of some Caribbean currencies particularly in two of its biggest markets, Jamaica and Haiti. These operating environments can be unpredictable.
One has to contend with hurricanes, low income per capita, hostile regulatory regimes and fluctuating exchange rates which sees Digicel earning in these weak currencies yet reporting in US dollars.
“Digicel’s debt burden is concerning and the bond prices have been tumbling this year nevertheless the bondholders are keeping faith with Denis O’Brien and Digicel. It has to be one of the most compelling business stories coming out of the Caribbean in recent times.”