Debts, DNA investigations, multinationals, Digi’s key risks reported to investors

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Telecom service provider Digi, the majority owner of Romanian company RCS&RDS, warns its shareholders and investors on the Stock Exchange about the risks to which the Group and its subsidiaries are exposed.

”We face significant competition in all our markets and business lines, which may encourage the movement of customers to our competitors and thereby adversely affect our revenue and profitability. All our principal competitors in our core Romanian and Hungarian markets are part of much larger international telecommunication groups, and may enjoy certain competitive advantages, such as greater economies of scale, easier access to financing and more comprehensive product offerings in certain business lines,” Digi’s financial report for the three month period ended June 30, 2017 reads.

Also, Digi administrators are worried about the impact of indebtedness degree on business development:

”Our leverage and debt servicing obligations may require us to dedicate a substantial portion of our cash flow from operations to payments on our debt and increase our vulnerability to economic or business downturns. Additionally, we may incur additional indebtedness in the future, which would increase the consequences of such substantial leverage and debt servicing obligations. Our restrictive debt covenants limit our ability to incur or guarantee additional indebtedness and could limit our ability to finance our future operations and capital needs and our ability to pursue acquisitions and other business activities that may be in our interest,” Digi notes.

The group controlled by the Hungarian businessman Zoltan Teszari had total debts of EUR 1,197 billion on  June 30, 2017 compared to EUR 1,196 billion at  December 31, 2016, according to the report released on Wednesday and sent to Bucharest Stock Exchange (BVB).

The company managed to reduce its long-term debt from EUR 746.4 million to EUR 734.6 million. Of the long-term debt balance, interest-bearing loans amounted to EUR 658 million, compared to EUR 665.5 million at the end of last year.

As regards the current debt, Digi registered a balance of EUR 463.2 million, up by EUR 13 million than the amount of EUR 450.4 million reported six months ago.

With the reduction of long-term debt, Digi significantly increased its net profit in the first six months of this year, from EUR 6.5 million in H1 of last year to EUR 31.8 million. The increase was mainly due to higher revenues, supported by the development of mobile phone services, but also to the cut of financial costs and corporate tax expenses.

However, Digi stresses that the economies of the countries where it operates are vulnerable to market downturns and economic slowdowns elsewhere in the world.

”The impact of global economic developments is often felt more strongly in emerging markets such as Romania and Hungary than it is in more mature markets. The political environment in Romania and Hungary, our main countries of operation, may experience significant political instability,” the report also shows.

Last but not least, the company reminds about the possible consequences of DNA files.

”The criminal investigation of the Romanian National Anti-Corruption Directorate (DNA) in relation to offences of bribery and money laundering alleged to have been committed by RCS&RDS and one of its Romanian subsidiary and certain of our executives may divert management attention and resources, may affect our reputation and, if ultimately finalized through an unfavorable verdict by a court of law, may affect some of our assets, may materially adversely, business, financial condition and prospects. The investigation is ongoing. We will continue to fully cooperate with the investigation and believe that RCS&RDS, its subsidiary, and its current and former officers have acted appropriately and in compliance with the law,” Digi officials concluded.

 

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