Capwire trims losses to P20M, expects to be back in the black this yr

Capwire Telecommunications expects to trim down its losses from P100 million in the last fiscal year, to P20 million for the current fiscal year, a top company official said.

Capwire president Epitacio Marquez told The STAR that the company also expects to be in the black by the new fiscal year starting June 1, 2004, mainly due to increasing profits from data services, which now account for about 35 percent of revenues compared to about 30 percent last year.

The company has recorded positive EBITDA (earnings before interest, taxes, depreciation, and amortization) since last year but its bottomline was dragged down during the last fiscal year due to the adverse effects of the Sept. 11, 2002 bombing of the World Trade Center in the US on the latter’s economy (the Philippines is the third largest destination of international calls from the US) as well as the increase in access charges by Philippine carriers that include PLDT, Smart Communications, Globe Telecom, BayanTel and Digitel in February of 2003.

Marquez explained that due to the increase in termination charges of the large Philippine carriers, from eight cents per minute to 12 cents a minute, on US facilities-based carriers, the same amount being collected from Capwire when it brings traffic from the US and lands it in the Philippines, Capwire had to rely more and more on the so-called own network traffic or those mostly being brought in by sister company PT&T. "It became hard for us to sell non-PT&T traffic and forced us to focus on our own-network traffic," he said.

Capwire’s top executive said in order to further improve their business, the company will be depending less on traffic coming from PT&T and instead increase revenues coming from Internet-based services such as non IP-VPN (Internet Protocol – Virtual Private Network), IP-VPN, frame relay, and packet-based services.

Marquez revealed that at present, own network traffic accounts for about 90 percent of long distance revenues. "We want to grow our off-net traffic instead," he stressed. The company is an international gateway facilities (IGF) operator based in Manila.

Unlike other telecommunications companies that have gone into retailing of prepaid Internet cards, Marquez said they would rather focus on broadband technology providing Internet access to businesses.

Capwire’s P730-million debt burden (exclusive of interests) has been pulling down the company. It has recently asked its creditors to give it more time before it starts resuming interest and principal payments.

Company officials revealed that Financial and Strategic Restructuring Advisory Inc. has been named third-party advisor upon the recommendation of Capwire’s creditors. The advisor has submitted its recommendations on a revised financial restructuring plan for Capwire which will be evaluated by a 10-man management review committee, composed of five representatives from the creditors and five from Capwire.

Capwire’s former business and financial restructuring plan proposed three years ago recommended a grace period of two years for the payment of interests and three years on the payment of the principal. The company was supposed to start paying the interest last year and the principal next year but due to the 9-11 attack and the access charge increase, Capwire’s business assumptions changed and it was unable to meet interest payments beginning 2003.

"We are not yet sure when we can start paying interest again. However, we are confident that this will be soon as we start turning around the business," Marquez said.