Digicel has been a major cash cow for Denis O'Brien in recent years, according to the IPO document filed with the Securities and Exchange Commission in the US.
In the past three full financial years, the company has paid him $1.1 billion in dividends. He receives a quarterly payment of $10 million each year. In addition, he was paid special dividends of $650 million in February 2014 and $300 million in June 2012.
Digicel said it does not “currently intend to declare any further dividends on its common shares” for the year-ended March 31st 2106 and it is not planning to pay a dividend out of the proceeds of the IPO.
Digicel also pays fees annually to various entities associated with Mr O’Brien for services rendered.
Island Capital received $28.6 million over the past three financial years for advisory services and fees associated with transactions conducted by the group.
In addition, Digicel paid $2 million to Communicorp, a media investment company owned by Mr O'Brien, for office space, printing and telecoms services.
Expenses
It also paid $4 million to Communicorp and Island Capital for “expenses paid by these two companies on our behalf”, including legal and professional fees, travel and accommodation costs.
Digicel has also retained ICAN Ltd, a subsidiary of Communicorp, to develop and build a intranet and internet sites, paying $1 million over the three years.
And it has a passenger services agreement with AC Executive Aviation Services Ltd, which operates an aircraft owned by a company controlled by Mr O’Brien.
Rental charges paid to this company amounted to $26.5 million over the three years.
In addition, it has engaged Sierra Support Services (St Lucia ) Ltd, which is affiliated with Mr O’Brien, to install a fibre optic network and to maintain other network facilities operated by Digicel.
The contract with Sierra is on “a cost plus basis” and Digicel paid it $41.6 million in the year ended March 31st 2015.
According to the document, Digicel’s nine directors, including Mr O’Brien, shared $4.1 million in compensation last year while its 10 senior managers were paid an aggregate $4.5 million.
In addition, just more than three million share options had been issued to senior management and directors as of June 26th.
Senior management and directors were also entitled to $693,000 in aggregate at June 26th with respect to certain options held by them that have been cancelled and will be repurchased by Digicel.
Share options
The document details generous share option schemes. Some 5.7 million options were issued in 2011 to “employees, directors and consultants”. In October 2013, the Digicel board approved the repurchase of the vested options, over a five-year period at exercise prices ranging from $22.26 to $35.50.
This resulted in option holders receiving cash payments of $15.5 million in the year ended March 31st 2015 and $14.4 million for the previous financial period.
A liability of $2 million in relation to cancelled options becomes payable between December 2015 and December 2017.
In October 2013, Digicel established two new option schemes for another 5.7 million shares.
“As of March 31st 2015, options with respect to 4.5 million shares had been issued, of which 2.2 million were issued to senior management and directors,” the document states.
These options are exercisable in tranches over six years at prices ranging from $28.50 to $35.51.
Digicel charged $9.4 million against income last year as share-based compensation in respect of its directors and senior management.
It also established a phantom share scheme in 2013, which vests over two to three years, subject to the achievement of certain service and performance-based criteria.
As of March 31st 2015, 2.5 million phantom shares had been issued to directors and senior management. “Digicel has a remaining liability in relation to outstanding phantom shares of $17.7 million,” the document states.
