Digicel upgraded but under pressure

The financial performance of telecoms Digicel Group has stabilised, with its operations generating over US$14 million in cash for the year, leading to a rating upgrade by Moody’s.

Digicel has been alleviated by some of its debt burden. However, challenges persist in vulnerable markets for the company that was taken over by its creditors and put under new management.

“The company’s cash flows have been under pressure due to tough operating environment in markets such as Haiti,” said Moody’s while the situation is more stable now, its consumer environment remains fragile,” rating agency Moody’s.

Moody’s recently upgraded Digicel International Finance Limited’s ‘corporate family rating’ to B3, along with its senior secured bank credit facility ratings. Digicel Group was previously at level Caa2 prior to its rating being ceased by Moody’s.

This positive shift is a direct result of Digicel’s enhanced liquidity and capital structure, post the debt restructuring it underwent, the rating agency said. Digicel is now expected to maintain core earnings or EBITDA margin above 40 per cent because of its strong competitive position.

Digicel’s cash balance amounted to US$200 million up to March. No comparative figure was provided for 2023.

“Digicel remains exposed to certain risks, including economic instability in key markets like Haiti, which accounts for approximately 18 per cent of its revenue,” stated Moody’s. The rating agency also highlighted the impact of governance considerations in the upgrade.

“The ratings could be upgraded if the company continues building a positive operating track record,” Moody’s stated, adding that failure to manage liquidity or refinance its US$2.3 billion debt, due in May 2027, could lead to a downgrade.

Digicel Group Limited, a provider of Internet, cable and phone services across 30 markets, was founded by former chairman Denis O’Brien. The Irish billionaire became a minority owner under the restructuring, but remains on the board.

In January, the private equity firms that took over Digicel in a debt swap, appointed technology guru Rajeev Suri to replace O’Brien as chairman.

stephen.jackson@gleanerjm.com