Omantel may inject $70m into WorldCall

Troubled arm needs funds for capital expenditure, debt restructuring.

Express November 13, 2010

KARACHI: Omantel, a major stakeholder in WorldCall Telecom, has decided to inject $70 million into the latter which is facing financial problems.

Omantel’s board plans to convene an extraordinary general meeting to seek authorisation for issuing a guarantee to a third party for funding the company’s subsidiary. WorldCall requested $70 million in funding to meet its capital expenditure and restructure debt.

Omantel acquired a 56.8 per cent stake in WorldCall for $193 million in 2008 as part of its international expansion strategy.

The recent step by Omantel may give a new lease of life to WorldCall Telecom Limited, which has been grappling with financial woes, according to IGI Securities.

The company has been facing stiff competition, mainly from Pakistan Telecommunication Company Limited (PTCL), as cut-throat pricing has eroded the company’s margins.

Losses of the famous local TV cable provider doubled to Rs744 million in the first nine months of 2010 compared with Rs346 million in the same period last year.

The company’s financial health has been further hit by the growing interest cost, which stands in the vicinity of Rs558 million, 52 per cent of the company’s gross profits.

During the year, shareholders also disposed of the company’s foreign subsidiary in Sri Lanka, which had accumulated losses of Rs145 million till 2009.

The debt restructuring will provide WorldCall some breathing space, however, the company’s financials do not seem to be coming in the green anytime soon, IGI Securities wrote in a report.

Unless a major cost-cutting drive is undertaken, the financial woes may deepen as stiff competition has already eroded gross margins, the report said. Implementation of this plan will lead to a knee-jerk reaction for the stock price, the research firm claims.

The company operates in three segments — cable TV, broadband services and calling services. Around 80 per cent of the total revenues are generated from the voice segment while the other two segments contribute 20 per cent.

Published in The Express Tribune, November 13^th, 2010.