Transcript Document

Financing for Telcos:
A Caribbean Perspective
July 15, 2008
Agenda

Introductions
:10

Overview of Caribbean Telco Market Environment
:10

Panel Discussion
:40

Audience Q&A
:10
2
Introductions
Charles Uhrig
(727) 567-5020
charles.uhrig@
raymondjames.com
Justin Cadman
Raymond James
Telecom Investment Banking
Full-service investment bank offering
equity capital raising, M&A, and strategic
advisory services.
(727) 567-5102
justin.cadman@
raymondjames.com
John Cole
(770) 618-3213
[email protected]
Michael Prior
(978) 619-1301
[email protected]
Co-Bank
Lender / Communications Division
Atlantic Tele-Network
Telco Perspective
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.
3
Introductions
Howard Armstrong
(876) 999-8775
howard.armstrong@
analysysmason.com
Analysys Mason
Telecom Consultant
Tim Lorimer
Scotiabank
(416) 866-6755
tim.lorimer@
scotiabank.com
Lender
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.
4
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
5
Share Price Performance of Caribbean/LatAm Telcos
Caribbean/LatAm Telcos Relative Price Performance
250
225
200
Wireless +77%
175
Wireline +69%
C&W +59%
150
125
S&P +3%
100
75
Jul-05
Jan-06
Jul-06
(1)
Wireless
Jan-07
(2)
Wireline
Cable & Wireless
Jul-07
Jan-08
Jul-08
S&P 500
Shares of publicly traded Caribbean / Latin American
companies have outperformed the U.S. stock market.
Notes:
(1) Wireless index includes AMX, NIHD, TMB, TSU, and VIV.
(2) Wireline index includes ATNI, AXTEL, BRP, GVT, MXT, TMX, TNE, and TSP.
6
Telecom Penetration: A Growth Opportunity
G-7 Countries
Haiti
Costa Rica
Dominican
Republic
Brazil
Mexico
Panama
U.S. Virgin Islands
Trinidad & Tobago
Puerto Rico
Barbados
140%
120%
100%
80%
60%
40%
20%
0%
Jamaica
Canada
Japan
United States
France
Germany
United Kingdom
140%
120%
100%
80%
60%
40%
20%
0%
Italy
Wireless Penetration
Caribbean / Latin American Countries
Wireless penetration has significant upside opportunity across much
of the Caribbean/Latin America.
Source: International Telecommunications Union
7
Telecom Penetration: A Growth Opportunity
0%
Haiti
Dominican
Republic
Jamaica
Panama
Brazil
Trinidad & Tobago
Puerto Rico
Mexico
20%
20%
Costa Rica
40%
Barbados
60%
U.S. Virgin Islands
80%
Japan
40%
100%
Italy
United Kingdom
France
60%
United States
80%
Canada
100%
Germany
Wireline Penetration
0%
G-7 Countries
Caribbean / Latin American Countries
While wireless growth should eclipse wireline growth in the region,
there should continue to be modest, steady wireline growth.
Source: International Telecommunications Union
8
Telecom Penetration: A Growth Opportunity
G-7 Countries
Haiti
Panama
0%
Trinidad & Tobago
0%
Dominican
Republic
20%
Mexico
20%
Puerto Rico
40%
Brazil
40%
Barbados
U.S. Virgin Islands
60%
Costa Rica
80%
Jamaica
France
Germany
60%
100%
Italy
United Kingdom
United States
80%
Japan
100%
Canada
Internet Users
Caribbean / Latin American Countries
Many Caribbean / Latin American countries have very low Internet usage,
reflecting low penetration of data services. There is significant opportunity for
broadband/data growth.
Source: International Telecommunications Union
9
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
10
Caribbean Telecom Transactions
The Caribbean telecom industry is a hotbed of investment and M&A activity.
Announced
M&A
Aug-07
Mar-07
Dec-06
Dec-06
Nov-06
Nov-06
Sep-06
May-06
Apr-06
Apr-06
Mar-06
Jun-05
Target
Acquirer
Oceanic Digital Jamaica
Centennial (Dominican Republic)
Telbo (Antilles)
BVI Wireless
NewComm Wireless Services Inc.
U Mobile Guyana
Digicel El Salvador
Comcel (Haiti)
Verizon Dominicana
Telecomunicaciones de Puerto Rico
Bouygues Tel Caraibe (French West Indies)
Cingular (Bermuda and other islands)
America Movil
Trilogy Capital Partners
Digicel
E. Oliver Capital
PRWireless
Digicel
Digicel
Trilogy Capital Partners
America Movil
America Movil
Digicel
Digicel
Bahama Telecommunications Company (Pending)
Teleco (Haiti)
Belize Telecommunications
Antigua Public Utilities Authority PCS
Unknown
Various Investors
Belize Telemedia Limited
Digicel
Privatizations
Jun-07
Sep-06
Nov-05
Equity Investments
May-08
Bermuda Digital Communications
Dec-06
PRWireless (Puerto Rico)
Jan-06
Open Mobile (Puerto Rico)
Atlantic Tele-Network
M/C Ventures, Columbia Capital
M/C Ventures, Columbia Capital
11
Public Company Valuations
Enterprise Value / 2008E EBITDA
Carib./LatAm Wireless
Carib./LatAm Wireline
10.0x

Valuations vary depending on country
and company specific factors

Caribbean & Latin American average
2008E Enterprise Value / EBITDA:
8.0x
6.0x
5.3x Avg.
4.0x
3.3x Avg.
2.0x
Wireless Average
8.0x
6.0x
–
Wireless:
5.3x
–
Wireline:
3.3x
Wireline Average
7.1x
6.1x
5.3x
3.3x
4.0x
TFONY
TSP
CTC
TEO
TNE
BRP
NIHD
MICC
AMX
CW-GB
VIV
TSU
ENTEL
0.0x

Valuations are still reasonable, and
represent a discount to corresponding
U.S. multiples despite a more robust
growth profile.
2.0x
0.0x
Caribbean /
Latin America
U.S.
Caribbean /
Latin America
U.S.
12
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
13
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.
Leverage ─ Debt / 2008E EBITDA
Wireless Average
Wireline Average
4.0x
3.2x
3.1x
2.0x
0.6x
0.6x
0.0x
Caribbean /
Latin America
U.S.
Caribbean /
Latin America
U.S.
14
Panel Discussion
15
Audience Q&A
16
Charles Uhrig
727-567-5020
Justin Cadman
727-567-5102
17
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
18