Digicel Said to Bid for Orange Dominican Republic Unit
Digicel Group Ltd., seeking to expand its position as the Caribbean’s largest phone company, is bidding for Orange SA’s (ORA) Dominican Republic unit, according to people with knowledge of the matter.
The company run by billionaire Denis O’Brien is one of five bidders interested in Orange Dominicana, which is expected to be sold by the end of the year, said the people, who asked not to be identified because the process in confidential. The sale is expected to generate more than 1 billion euros ($1.3 billion), one of the people said.
An acquisition would give Kingston, Jamaica-based Digicel control of the Caribbean nation’s second-biggest mobile-phone company, with 38 percent of the market, trailing America Movil SAB’s 51 percent, according to Orange. Digicel is already the largest carrier in neighboring Haiti, one of its 31 markets in the Caribbean, Central and South America and the South Pacific.
Orange Chief Executive Officer Stephane Richard said in July that the Paris-based company was examining the sale of the Dominican unit. Richard is focusing on reducing debt, cutting costs and restoring growth at home, where competition from discounter Iliad SA (ILD) has weighed on phone bills.
Antonia Graham, a spokeswoman for closely held Digicel, declined to comment. Olivier Emberger, a spokesman for Orange, said the company is reviewing its Dominican operation.
“As is usual practice for such a review, this includes a process in which potential buyers are invited to submit offers,” Emberger said. “The group emphasizes that the sale of its activity in the Dominican Republic is only one of several options available and that no decision has been made in this respect.”
The Dominican unit reported wireless sales of 451 million euros in 2012, or about 1 percent of Orange’s total revenue. The division’s sales were up 7.6 percent from the previous year.
Orange slipped less than 1 percent to 9.41 euros at the close in Paris. At the parent company’s enterprise value of about 1.4 times sales, the Dominican Republic unit would be valued at about 600 million euros.
The yield on Digicel’s 7 percent bonds due in 2020 climbed 0.04 percentage point to 7.15 percent, the highest since August 2012.
Stocks on the Standard & Poor’s 500 Telecommunications Services Sector Index trade at about 2 times sales, which would value the unit at about 900 million euros.
Orange’s net debt at the end of June was 29.6 billion euros, for a ratio of net debt to earnings before interest, taxes, depreciation and amortization of 2.21 times. Orange’s forecast is to bring the debt ratio back to about 2 times by the end of 2014.