€470m dividend paid to Digicel shareholders

Mobile phone group Digicel paid a "special" dividend of $650 million (€470 million) to Denis O'Brien and other shareholders last month and will pay $60 million in share option payments to senior executives of the company over the next two years.

These details are included in a document to promote Digicel Group Ltd’s latest fundraising. The company, which acts as the overarching entity for Digicel’s operations in the Caribbean, central America and Asia-Pacific, is seeking to raise $1 billion from investors through a senior loan note with an eight-year maturity to be used to repay more expensive existing debt.

The dividend last month follows on from payments of $346.8 million last year, €115.9 million in 2012 and $45.3 million a year earlier. This amounts to $1.16 billion in less than four years.

The bond document also shows Digicel's revenues in the three months to the end of December declined to $698.8 million from $710.1 million for the same period of 2012. Growth in Trinidad, the French West Indies and "other markets" was offset by the effects of currency exchange in Haiti, Jamaica and Papua New Guinea. On a constant currency basis, revenues rose by 3 per cent to $734 million in the quarter.

Cost control

Tight cost control allowed the company to keep its Ebitda (earnings before interest, tax, depreciation and amortisation) steady at $305 million for what is the third quarter of the company’s financial year.

Digicel closed 2013 with 13.4 million subscribers, 600,000 more than a year earlier. Its total debt at the end of last year was $6.1 billion, or five times its Ebitda. It had cash of $1.5 billion before the payment of its special dividend.

The document also states that Digicel Panama is the subject of a “pending tax audit” for which the Government there is seeking “material amounts, including penalties and interest”.

“The Government tax authority has notified Digicel Panama that it believes there have been criminal tax violations by Digicel Panama and its legal representatives and officers (which include certain of our senior officers),” it adds.

The document states Digicel will “vigorously contest” the findings as it has made “all required disclosures in relation to its tax affairs”.

The aggregate remuneration paid to the company’s directors, including Mr O’Brien as chairman, was $2.5 million for the six months to the end of September 30th, 2013.

The document also details a number of related-party transactions with companies associated with Mr O’Brien.

It pays Island Capital an annual management fee of €500,000 plus expenses. Island Capital is also entitled to received a $5 million fee from the $1 billion fundraising.

Digicel also paid $300,000 to Communicorp Group, which owns radio stations, including Today FM and Newstalk in Ireland, for the provision of office space for the six months to the end of September.

It paid $700,000 to Island Capital and Communicorp for expenses they paid on its behalf for legal and professional fees, travel and accommodation costs over the same period, and €100,000 to ICAN Ltd, a subsidiary of Communicorp, for web services.

AC Executive Aviation Services Ltd was paid $4.3 million in the six months to the end of September for the provision of flights to Digicel. This company operates a plane owned by Mr O’Brien.