Shareholders of Starcomms Plc have approved a $210 million capital injection by Capcom Limited into the company to salvage it from an imminent collapse.
The investment, THISDAY gathered, consists of a cash sum of $85 million including other assets to be contributed by Capcom to Starcomms.
It will also involve the subscription of 662, 550,000 ordinary shares by Capcom, giving it about 90.5 per cent of the company’s Issued Share Capital of Starcomms’ post placing.
Speaking in Abuja at the company’s 14th Annual General Meeting (AGM), Interim Chief Executive Officer, Mr. Olusola Oladokun said the proposed capital injection into the company remained the “only viable option for survival” after it ageing telecoms infrastructure, stiff competition and unsustainable tariff regime forced it into a N5 billion loss in 2011.
“Otherwise, it is expected that the company will have to declare insolvency and undertake a voluntary liquidation,” he said.
Capcom is a special purpose vehicle comprising both local and international partners, created solely for the purpose of making an investment into Starcomms and related transactions.
According to Oladokun, the Code Division Multiple Access (CDMA) segment of the telecoms industry had continued on a negative trend coupled with declining voice revenues amid limited opportunities to grow data revenue due to spectrum congestion.
He explained that the company had further legally defaulted on its financial obligations to both vendors and lenders in the past two years-and now relying on informal interest and repayment break agreed with major creditors to remain in business.
According to him, the company’s voice income witnessed a 45 per cent decline in 2011, from N16.3 billion in 2010 to only about N9 billion in 2011 largely because of high downtime the network across the country.
However, it data segment, notwithstanding accounted for about 35 per cent of total revenue for the period despite a 5 per cent decline.
The company’s Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) closed with a negative of N5.136 billion against positive EBITDA of N3.112 billion in 2010.
Starcomms’ shareholders’ fund also declined to only about N6.024 billion from N23.589 billion in 2010.
The interim CEO, was however, optimistic that “The significant cash injection as well as deployment of additional CDMA spectrum could re-position the company for a future growth which is rewarding to all stakeholders.
Amid its liquidity challenges, the company had outsourced several of its towers to reduced overheads and enhance customer experience-but to no avail.
“It is very clear that the company cannot sustain the cumulative losses experienced in the past four years...the future and ongoing concern status of the company is at significant risk unless a major cash injection is made into the business,” he told shareholders.