NEWS | Wednesday, 16 April 2008

Go AGM lifts the lid on Forthnet deal

David Darmanin

Quad-play telecoms provider Go plc Friday held its tenth Annual General Meeting (AGM), the first since government sold off its 60 per cent stake in Maltacom to Emirates International Telecommunications Ltd (EITL).
Confronted by public shareholders, who collectively own the remaining 40 per cent shares, a panel made up by Go directors answered a series of questions related to governance, the recent acquisition of 20 per cent shares into the Greek Telecoms company Forthnet as well as on the significant downsizing of employees over the last year.
CEO David Kay, who did not have available figures on how much the total spend on downsizing was, confirmed that over 200 employees made use of the voluntary retirement scheme over the last year. On his part, Go Chairman Sonny Portelli clarified that Go ensured to retain those employees that were crucial to the group’s operation.
Questioned on the rationale behind the acquisition of Forthnet shares, a decision that may have displeased a number of shareholders, EITL appointed director Depak Patmanabhan revealed that the Forthnet is looking into the acquisition of a new company.
The company’s annual report and financial statements show that the group maintained both its turnover and profit levels in 2007. Last year’s turnover amounted to €131.8 million, compared to the €129.3 million of the previous year. The group’s profit before tax was €27.7 million, compared to the €27.9 million in 2006.
The AGM approved the payment of a net dividend of €0.1165 equivalent to Lm0.05cnet of taxation to all shareholders, same as last year.

Go’s acquisition of 20 per cent shares into Greek telecoms company Forthnet came as a surprise to many. Public shareholders only learnt of the purchase after a decision had been made. Sources close to the telecoms industry informed this newspaper that the board of directors at Go plc itself was informed of this development only days before the acquisition procedure kicked off.
Speaking to Business Today on condition of anonymity, an analyst said: “This investment was driven by Tecom (EITL’s mother company, based in the UAE). It was not Go that was looking for a strategic investment… Tecom realised that they would have found stumbling blocks if they had to enter the Greek market alone, so they used a European hub. They figured out that if they were to use a company that is regulated by the EU, the approach would have been much smoother.”
At Go’s AGM last Friday, a shareholder said: “I don’t need Go to invest on my behalf, unless the investment is directly linked to its operations. I can invest my money myself. Why did you not increase the dividend on shares instead?”
Deepak Padmanabhan, one of the Tecom-appointed Go directors, answered: “For the future of Go, we needed to organically expand while keeping in the realms of the telecoms market, this is why we looked at what Go should invest in. We have also made this decision to increase the value of the company. We wanted to keep within the risk profile of the company, an EU investment was therefore necessary. This was the rationale behind this purchase.”
“What was the value add?”, another shareholder asked.
“Forthnet is a triple-play company, while Go is a quadruple player. The common portfolio increases value,” Patmanabhan replied.
A well-known local stockbroker, who was also at the meeting, asked : “You paid €11 for every €50 of Forthnet, when shares were available at €8 on the open market. Forthnet shares are now valued at €6.50. Why did this happen?”
At that point, Padmanhabhan revealed that Forthnet is looking into purchasing another company.
“It is important that you understand the dynamics of the deal,” he said. “We needed control of the company, which is why we approached Forthnet as strategic investors, not financial. If we had to buy shares from the public, the price would have skyrocketed. We bought the shares privately, where it is standard to pay 20 to 25 per cent on top of the public listing. Secondly, it would have been against the law to buy them from the public. Thirdly, Forthnet is looking at further investments, which means that we may need to borrow to further support the company. The share price does not bother us. Firstly because share prices have gone down worldwide, including Greece. Secondly because Forthnet is doing well in relation to its competitors, and thirdly because Forthnet wants to purchase another company – which will obviously imply a lower interest from investors.”
Reacting to this statement, the source said : “It is clear that Forthnet is in acquisition mode. From my information, they are looking into entering the market of Satellite TV.”
Correcting Patmanabhan’s statement, the analyst said “Forthnet is not a triple-play company yet. It is actually a double-play company that is soon to move into triple.”
Meanwhile, Go officially
announced yesterday that Forthnet S.A. entered into an agreement for the purchase of the entire issued share capital of Dutch companies Netmed BV and Intervision BV, which are involved in satellite telecommunications and e-business technology respectively.