ONO, the indebted Spanish cable operator, has drawn up plans to meet the €36 million senior facilities payment due in December. In addition, a further €414 million is due in 2010 and €519 million the following year.
“There is no doubt that the cash liquidity situation will become very challenging in the coming months and our cash generation will be insufficient to meet the scheduled repayment. As such, it will become necessary, evidently, to refinance the company,” CFO Jonathan Cumming told an investor call on the company’s third quarter financials.
“We are moving forward with a concrete proposal that we are now testing in more detail with our relationship banks. There can be no guarantee that this structure will prosper. We have not been able to offer the banks everything that they want, but we feel we have come up with a reasonable proposal that satisfies many of their issues”.
The main proposal revolves around a ‘lend and extend’ arrangement, a popular market refinancing scheme, but still requiring the support of additional banks. Cumming said he hoped to have all the stakeholders and banks on board before the end of the year with a view to the transaction being launched in the first quarter of 2010. Goldman Sachs is already acting as a financial advisor and has helped draw up the proposals.
September was the first month of positive additions for ONO since July 2008, but the Spanish cablenet still faced a third quarter reduction in residential customers of 0.7%. The company recorded EBITDA of €178 million compared to €179 million in the same period of 2008.
ONO can claim over 100,000 customers of Mediapro’s newly launched pay-TV football channel Gol TV. The agreement with Mediapro also includes the rights to retransmit pay-per-view matches, a much needed feature as buyrates have fallen since the reorganisation of Spanish football rights earlier this year. By passing the minimum guarantees agreed with Mediapro, ONO has begun to make a small profit on the channel, which will appear in next quarter’s results.
Triple play services were taken by 35% of the subscriber base on Q3 2008, compared to 34% in Q3 2008. A cross sale campaign resulted in the number of RGUs taken per customer rising from 2.11 in September 2008 to 2.16 in 2009.
ONO CEO Rosalía Portela said although improvements had been made, the company was still operating in a difficult macro-economic environment worse than that expected a year ago. She said that unemployment, currently running at 18%, and the fear of unemployment was impacting television and telephony consumption. This runs counter to the experience in other markets that has suggested television remains a cheap form of entertainment, even if there has been some spin-down from premium channels towards basic packages.
“We underestimated some issues such as the dramatic changes in customer telephone usage patterns, but we have been able to counter the revenue decrease by cost savings across our business,” admitted Cumming.
Having lost 51,000 customers over the course of the last year, a new commercial programme has been implemented, which is already delivering positive results in terms of subscriber numbers and ARPU. A new television advertising campaign got underway at the end of August after a year’s absence. The commercials are concentrating on the broadband service and quick installation times. By focussing on this side of the business the operator is reducing the amount of expenditure on the cost of new set-top boxes.
“We have had two months of very positive progress and we have now started to add customers to the basic tier rather than lose them,” said Portela. “The net ads in September would have been even better had it not have been for regulatory change.”
The loss of 16,000 customers was brought about by the combination of seasonal factors and a new user’s rights directive that forces operators to disconnect customers within two days of their request, rather than the 15-day period under the previous directive. Five thousand customers were lost as a consequence of the new directive, taking the total at September 30, 2009 to 1,888,000.
Gross churn was also hit, rising by 2.4pp to 19.4%.”Without this regulatory change the churn will have been inline with what we had experienced in previous quarters.”
Cumming said the third set of good stable results would enable the company to present a good refinancing case to the banks and talk about the turnaround of the business in the past tense.
Leave a Reply