Wednesday, December 26, 2012

Starcomms posts N5.3 billion 9-month Loss

Starcomms which used to be a leading telecoms operator in Nigeria has announced a humongous loss! I guess the telecoms boom in Nigeria is now over. Read details below:


Starcomms announces N5b nine-month loss as shareholders meet

Ahead of the extra-ordinary general meeting of shareholders scheduled for this Friday, Starcomms Plc has announced that it recorded a net loss of N5.3 billion in the third quarter, painting a worsening scenario for the ailing telecoms company.

In the latest window on the operations of the company, the board of directors indicated that the company’s net loss during the third quarter ended September 30, 2012 worsened to N5.3 billion compared with N478.69 million recorded in the corresponding period of 2011.

According to the report, total sales had more than halved from N16.1 billion in 2011 to N7.5 billion in 2012. The company’s balance sheet remained precarious with net deficit of about N20 billion in 2012 as against N14.7 billion in 2011.

The third quarter report followed quarter-on-quarter performance trend for the ailing company. First quarter report had shown net loss of N1.9 billion while this mounted to N2.96 billion in the second quarter.
Analysts said the worsening performance outlook indicated by the third quarter report might persuaded shareholders to consider urgent measures to salvage whatever they could of their investments in the company.

Shareholders of Starcomms are scheduled to meet on Friday to consider the reconstruction of the outstanding shares of the company and acquisition of 90.5 per cent equity stake by a new core investor.
The main agenda of the meeting is the proposals that Starcomms reconstruct its current outstanding shares and subsequently offer 90.5 per cent post-reconstruction equity stake to Capcom in exchange for total investments of $210 million, about N32.7 billion through a private placement of shares.

Starcomms had secured the statutory order of the Federal High Court to convene extra-ordinary general meeting of members of the company for consideration of the Scheme of Arrangement for the reconstruction and acquisition.

The meeting is expected to highlight the potential of the acquisition but it would also contend with concerns by shareholders, who have not received any dividends from the shares being wiped away.

According to the plan for the share reconstruction, the telecommunication company’s current outstanding shares of 7.09 billion ordinary shares of 50 kobo each may be reduced to less than one billion shares. Starcomms’ shares are trading at the Nigerian Stock Exchange (NSE) at par value of 50 kobo, giving the company market capitalisation of N3.54 billion.

Share reconstruction could initially wipe away some N3.1 billion in market values, although post-reconstruction and acquisition revaluation may likely restore values to shareholders as the new shares respond to market forces.

The proposal also includes a window for additional investments in the company to pre-reconstruction shareholders through a rights issue. The rights issue, which would be undertaken after the private placement to Capcom, will be on the same valuation as those shares offered to Capcom.

On completion of the private placement to Capcom, Asset Management Corporation of Nigeria (AMCON) and Helios Investment Partners would acquire equity stakes in Starcomms through equities derived from Capcom shareholding. AMCON’s shares would result from conversion of bad loans it took over from banks, which Starcomms was indebted to.

Capcom is a special purpose vehicle (SPV) created for the purpose of making the investment into Starcomms and other related transactions. Investors under Capcom included MBC, a private trust with a focus on investing in emerging markets; Pan African Capital through its asset management division, PAC Asset Management; and the family offices, Bridge house Capital and Oldonyo Laro Estates.

As part of the investment agreement, Capcom would acquire, release and merge the spectrum licence of MTS and the CDMA mobile telecoms business of Multi-Links to that of Starcomms.

Besides, Capcom will provide $98 million in cash to finance the integration of MTS and Multi-Links into Starcomms and for the emergent company to meet on-going short-term losses in the business and to deliver the combined company’s new business plan.

The proposed transaction is expected to create a leading CDMA operator in Nigeria and represents a fundamental step as part of the consolidation move in the telecoms industry.

With the benefit of the 20 MHz of contiguous 1900MHz spectrum to be held by the consolidated operations, the largest spectrum allocation for any mobile operator in Nigeria, the new entity will be positioned at the forefront of the shift away from current generation of services into a Long Term Environment (LTE) technology platform capable of delivering new 4G and related data and other services that will offer customers substantially improved performance.

Source: The Nation

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