Liberty Telecoms needs P7.15 B in fresh capital to generate revenues

MANILA, Philippines - Liberty Telecoms Holdings, Inc., which is partly-owned by San Miguel Corp. (SMC), will require fresh capital as it plans to generate revenue by expanding its service capacity in the next decade. These, among others, were indicated in the company’s revised financial plan included in its rehabilitation plan as approved by a Makati court. The company requires P7.15 billion in new capital, P4.45 billion (or 62.23 percent) of which will be used to acquire subscriber and peripheral equipment and supplies to launch Libertyphone PCO. Purchases will also include equipment for datacoms and base stations, allowing the company to provide Packetlink services and WiMax broadband services. The company is also required to spend for mobilization costs and frequency returning or change of controller card for broadband WLL 700 and data service equipment. Some 31.8 percent or P2.27 billion will be used for debt payments while the remaining 5.89 percent or P421.13 million will be used for working capital. “To finance its funding requirements, the management intends to raise about P2.04 billion. The balance of P5.107 billion will be financed internally by operations," the revised financial plan signed by chief finance officer Efren P. Lozada said. Liberty Telecoms, which is the holding company for Liberty Broadcasting Network, Inc. (LBNI) and Skyphone Logistics, Inc., sought deferment of debt payments by submitting a rehabilitation petition before the Makati Regional Trial court in August 2005. Shortly before filing its petition, the company already decided to halt business operations due to lack of capital required to run normal operations. Although approved in 2006, the rehabilitation plan was only good until 2010. Moreover, the same plan directed the company’s directors and stockholders to buy the company’s unsubscribed capital stock not later than the end of 2009. Besides being prohibited to declare any kind of dividend during the rehabilitation period, board of directors are disallowed from receiving double honoraria, director's fees, and/or compensation for their attendance with any board or body of the petitioners. "Hence, a review of the compliance of all the terms and conditions of the plan and of this approval shall be made not later than Sept. 30, 2010 unless there is a good reason for the early withdrawal of this approval," the Makati court said. Liberty Telecoms prepared a revised 10-year rehabilitation plan that will consist of two phases of implementation. During the first 18 months from the approval of the rehabilitation plan, identified lenders are required to finance P81.6 million to cover costs to maintain and secure company assets and other expenses. This will lead to changes in stockholders' equity that may result in changes in operational structure and corporate policies. For the remaining period up to the 10th year, Liberty Telecoms expects $40 million in new funds from interested investors would have been injected to its coffers which will be used to begin commercial operation. "Liberty will be a highly profitable and stable company during the next 10 years. These favorable financial results will build up starting in year three, only the third year of expansion plan period. The company will become profitable due to increased revenues and improvements in operating efficiency. Since the management plans to finance majority of its funding requirements during the 10-year period primarily from capital infusion, it will become debt-free," it read. The company expects to post a turnaround in the fourth year, earning P445.06 million while revenues will likely increase at a compounded annual growth rate of 1,865 percent to P8.3 billion in the 10th year from P445 million in the fourth year. "The forecast results of the first 10 years of the company's commercial operations show that Liberty is a good credit risk because of improved profitability and liquidity, strong solvency and high protection to creditors in the payment of interest and principal," Liberty Telecoms said. In May, conglomerate San Miguel Corp. disclosed it would acquire almost half of cash-strapped Liberty Telecoms. Its board authorized the management to buy approximately 32.7 percent of Liberty Telecoms from existing stockholders for an estimated amount of P2.2 billion and pursue acquisition of the balance of investment in coordination with its joint venture partner Qatar Telecom. - GMANews.TV