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
Introductions Charles Uhrig (727) 567-5020 charles.uhrig@ raymondjames.com 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. Raymond James Telecom Investment Banking Co-Bank Lender / Communications Division Atlantic Tele-Network Telco Perspective Justin Cadman (727) 567-5102 justin.cadman@ raymondjames.com John Cole (770) 618-3213 firstname.lastname@example.org Michael Prior (978) 619-1301 email@example.com
Introductions Analysys Mason Telecom Consultant Scotiabank Lender Howard Armstrong (876) 999-8775 howard.armstrong@ analysysmason.com 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) 866-6755 tim.lorimer@ scotiabank.com
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
(2) (1) Share Price Performance of Caribbean/LatAm Telcos Wireless +77% Wireline +69% C&W +59% S&P +3% 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.
Telecom Penetration: A Growth Opportunity Wireless Penetration Wireless penetration has significant upside opportunity across much of the Caribbean/Latin America. Source: International Telecommunications Union
Telecom Penetration: A Growth Opportunity Wireline Penetration While wireless growth should eclipse wireline growth in the region, there should continue to be modest, steady wireline growth. Source: International Telecommunications Union
Telecom Penetration: A Growth Opportunity Internet Users 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
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
Caribbean Telecom Transactions The Caribbean telecom industry is a hotbed of investment and M&A activity.
Public Company Valuations Enterprise Value / 2008E EBITDA Carib./LatAm Wireless Carib./LatAm Wireline • 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. Wireless Average Wireline Average
Factors Influencing Valuation • Public company valuations provide investors and acquirers with a benchmark utilized when evaluating investment opportunities. • Reasons for valuation variations include:
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