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