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Jagged Blue |
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Tuesday, March 5, 302 AP
Web posted at 1347 UST.
As the market had already predicted, Belson Corporation is buying the struggling
Blue Telecommunications group, as announced by the company Chairman and Acting-CEO, Mark J
Belson, today in his speech at the company's annual general meeting.
Belson will pay Û207 million from the Û20 billion "war chest" announced earlier today, for 300 million shares in the company, or 53.2%, making it a subsidiary, and will then invest a further Û600 million in the company to retire debt and promote profitability.
Blue Telecommunications are a cell phone communications company with some 380,000 subscribers, making it the fourth-largest cell phone company in Utania.
To be known as Belson Blue, the company will be remade in the Belson image, and will be
integrated into the Belson management structure. Mr Belson foreshadowed significant changes
in the struggling competitor.
Blue Telecommunications, or BlueTel as it is more commonly known, is the second competitor to the government near-monopoly of telecommunications, and third company to build infrastructure in Luka.
Losses and debt
But, in pursuit of customers, BlueTel is suffering a significant debt load as its customer base demands ever-increasing investment in new equipment. So much so that the First Bank of Utania has refused to extend any further credit to the company, after it borrowed yet another Û200 million last year bringing total debt to a billion punds. Debt-servicing ballooned, last year, to 29% of income.
The company made losses of Û112 million last year after losses of Û189 million the previous year.
Executives at the company, facing bankruptcy, were forced to look for a saviour, and found it in the cash rich Belson Corporation which had long expressed an interest in diversifying the company into the "technology sector", telecommunications and computing, as Chairman Belson said today, "the long-term future of food is to remain static, even become increasingly costly."
Belson Blue's future
Mr Belson said management at Belson Blue would be "under review", signalling several heads will roll, replaced by Belson executives. General Manager (Technology) Brian Kelp is expected to take over the new company as CEO, replacing the beleaguered Joe Palermo.
Aside from investing Û500 million, Mr Belson said Belson Blue would be raising
prices in response to "inflationary and cost pressures". Cell phones have been costing as
little as Û55 (C18.33) a month in Utania, with BlueTel being the cheapest supplier.
But, no more. Mr Belson said the company would now be charging an average of Û80
(C26.67) a month from April 1st, and call charges would rise to Û1.50 (C0.50) a minute.
To counter the effects of such price rises, the company would be spending Û50 million
this year on marketing.
He saw no reason why prices would leap so substantially again, provided the Government could "keep control of inflation".
Mr Belson said the company would break-even this year, after some cost-cutting. All debt would be retired within four years, and the company would be reporting earnings (profit) of Û367 million in 305ap.
He said the company's new task was to tap into the potentially lucrative emerging Utani market, as Utani become wealthier, cell phones will no doubt become more popular.
Shareholder concerns
Belson is paying Û0.69 per share for the 300 million shares, an offer considered very generous by Belson shareholders and investors, considering the actual share price of BlueTel (BTL:LSX) is a mere Û0.61 and rapidly falling. Mr Belson explained that the company was "buying a significant portion of a good company".
What Belson will bring is much-needed investment.
Belson will inject Û500 million into the group this years, using the funding to retire part of the Û926 million the company has in debts. It will increasing its share holding to 800 million shares of 1,063.4 million shares, or 75.2% of the company, triggering takeover proceedings, and allowing Belson to buy the remaining shares at market value. Whether they choose to do so, the Chairman would not confirm.
"We shall have to wait and see if the share price is acceptable. While we may have a lot of it, we do not have money to burn just yet", Mr Belson joked to an appreciative audience.
Belson today announced a Û27 billion profit.
There are an estimated 4.9 million cell phone users in Utania, with the state government-owned Utanian Telecommunications Company (UTC) having the lion's share of the market, 2.06 million subscribers, Telecom Nystonia has 1.28 million subscribers, and Cellular One having 680,000 subscribers, and Belson Blue, 380,000. There are five other, smaller companies without infrastructure of their own, sharing 500,000 customers.
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©Zeitgeist Magazine, 300 AP.
<TECH> ©Mike Ham, 2000. All rights reserved. No reproduction without, at least, tacit approval. ;-) |