financing for telcos: a caribbean perspective july 15, 2008
TRANSCRIPT
Financing for Telcos:
A Caribbean Perspective
July 15, 2008
2
Introductions :10
Overview of Caribbean Telco Market Environment :10
Panel Discussion :40
Audience Q&A :10
Agenda
3
Raymond James
Telecom Investment Banking
Co-Bank
Lender / Communications Division
Atlantic Tele-Network
Telco Perspective
Introductions
Full-service investment bank offering equity capital raising, M&A, and strategic advisory services.
Lender to communications, agricultural, and rural energy businesses with approximately $60 billion in total assets.
Offers wireless, local telephone, and international long distance voice and data services in the Caribbean and U.S.
John Cole(770) [email protected]
Michael Prior(978) [email protected]
Charles Uhrig(727) 567-5020 [email protected]
Justin Cadman(727) [email protected]
4
Analysys Mason
Telecom Consultant
Scotiabank
Lender
Introductions
Offers strategic advice, technical design, operations support, and market intelligence to telecoms, IT, and media and in over 90 countries worldwide.
A leading North American financial institution serving customers in 50 countries worldwide and offering personal, commercial, corporate and investment banking services.
Tim Lorimer(416) [email protected]
Howard Armstrong(876) [email protected]
5
Overview of Caribbean Telecom Environment
Competitive landscape varies widely by country
– Dependent in part on state of telecom liberalization & government
– Few multinational players (including Digicel and C&W)
– Numerous other participants
Significant growth opportunity fueled by wireless and Internet/data
– Attracting increased attention from investors
– Better growth profile than North America/Western Europe due to lower penetration rates
Unique set of considerations for operators and investors alike
– Political/regulatory outlook
– Consolidation opportunities
– Opportunities from continuing market liberalization/privatization
6
Share Price Performance of Caribbean/LatAm Telcos
Notes:(1) Wireless index includes AMX, NIHD, TMB, TSU, and VIV.(2) Wireline index includes ATNI, AXTEL, BRP, GVT, MXT, TMX, TNE, and TSP.
Caribbean/LatAm Telcos Relative Price Performance
75
100
125
150
175
200
225
250
Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08
Wireless Wireline Cable & Wireless S&P 500(1) (2)
Shares of publicly traded Caribbean / Latin American companies have outperformed the U.S. stock
market.
Wireless +77%
Wireline +69%
C&W +59%
S&P +3%
7
Wireless Penetration
Telecom Penetration: A Growth Opportunity
Source: International Telecommunications Union
Wireless penetration has significant upside opportunity across much of the Caribbean/Latin America.
Caribbean / Latin American Countries
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G-7 Countries
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ited
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ited
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100%120%140%
8
Telecom Penetration: A Growth Opportunity
Wireline Penetration
Source: International Telecommunications Union
While wireless growth should eclipse wireline growth in the region, there should continue to be modest, steady wireline growth.
G-7 Countries
Ge
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Ca
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ited
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ited
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Caribbean / Latin American Countries
U.S
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0%
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60%
80%
100%
9
Telecom Penetration: A Growth Opportunity
Internet Users
Source: International Telecommunications Union
Many Caribbean / Latin American countries have very low Internet usage, reflecting low penetration of data services. There is significant opportunity for
broadband/data growth.
G-7 Countries
Ca
na
da
Jap
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Un
ited
Sta
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Un
ited
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60%
80%
100%
Caribbean / Latin American CountriesB
arb
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0%
20%
40%
60%
80%
100%
10
Other Factors Driving Interest in Caribbean Telcos
Countries are closely aligned to larger economies in North American and Europe
Legal and political systems are generally advanced and parallel North American / Western European systems
Underlying economies and populations are growing steadily
Market liberalization/privatization creating new opportunities
Valuations generally still reasonable
11
The Caribbean telecom industry is a hotbed of investment and M&A activity.
Caribbean Telecom Transactions
Announced Target Acquirer
M&AAug-07 Oceanic Digital Jamaica America MovilMar-07 Centennial (Dominican Republic) Trilogy Capital PartnersDec-06 Telbo (Antilles) Digicel Dec-06 BVI Wireless E. Oliver CapitalNov-06 NewComm Wireless Services Inc. PRWireless Nov-06 U Mobile Guyana Digicel Sep-06 Digicel El Salvador Digicel May-06 Comcel (Haiti) Trilogy Capital PartnersApr-06 Verizon Dominicana America MovilApr-06 Telecomunicaciones de Puerto Rico America MovilMar-06 Bouygues Tel Caraibe (French West Indies) Digicel Jun-05 Cingular (Bermuda and other islands) Digicel
PrivatizationsBahama Telecommunications Company (Pending) Unknown
Jun-07 Teleco (Haiti) Various InvestorsSep-06 Belize Telecommunications Belize Telemedia Limited Nov-05 Antigua Public Utilities Authority PCS Digicel
Equity InvestmentsMay-08 Bermuda Digital Communications Atlantic Tele-NetworkDec-06 PRWireless (Puerto Rico) M/C Ventures, Columbia CapitalJan-06 Open Mobile (Puerto Rico) M/C Ventures, Columbia Capital
12
Public Company Valuations
Valuations vary depending on country and company specific factors
Caribbean & Latin American average 2008E Enterprise Value / EBITDA:
– Wireless: 5.3x
– Wireline: 3.3x
Valuations are still reasonable, and represent a discount to corresponding U.S. multiples despite a more robust growth profile.
Enterprise Value / 2008E EBITDA
Carib./LatAm Wireless Carib./LatAm Wireline
Wireless Average Wireline Average
5.3x
7.1x
0.0x
2.0x
4.0x
6.0x
8.0x
Caribbean /Latin America
U.S.
3.3x
6.1x
Caribbean /Latin America
U.S.
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
EN
TE
L
TS
U
VIV
CW
-GB
AM
X
MIC
C
NIH
D
5.3x Avg.
BR
P
TN
E
TE
O
CT
C
TS
P
TF
ON
Y
3.3x Avg.
13
Factors Influencing Valuation
Public company valuations provide investors and acquirers with a benchmark utilized when evaluating investment opportunities.
Reasons for valuation variations include:
Factor Lower Multiple Higher Multiple
Competition Fragmented Monopoly/Duopoly
Wireless penetration Highly penetrated Low penetration
Country size Very small Large
Political environment Unstable Stable
Regulatory environment Unstable Stable
Per capita GDP Low High
14
Debt and Equity Investor Considerations
Debt investors like stable cash flows and a certain regulatory/political environment.
– Capacity for Caribbean telcos to take on debt depends on these factors
Equity investors are also very interested in growth opportunities.
Wireless Average Wireline Average
Leverage ─ Debt / 2008E EBITDA
0.6x
3.1x
0.0x
2.0x
4.0x
Caribbean /Latin America
U.S.
0.6x
3.2x
Caribbean /Latin America
U.S.
15
Panel Discussion
16
Audience Q&A
17
Charles Uhrig 727-567-5020
Justin Cadman 727-567-5102
18
Contact Information
Firm Contact Title Email Telephone
Raymond James Charles Uhrig Managing Director, Tech & Telecom Group
[email protected] (727) 567-5020
Raymond James Justin Cadman Associate [email protected] (727) 576-5102
Atlantic Tele-Network Michael Prior CEO [email protected] (978) 619-1300
CoBank John Cole Managing Director, Comm. and Energy Banking Group
[email protected] (770) 618-3213
Scotiabank Tim Lorimer Vice President, International Corp. & Commercial Banking
[email protected] (416) 866-6755
Analysys Mason Howard Armstrong Director, Caribbean Business
[email protected] (876) 999-8775