Go’s board of directors yesterday survived a vote of no-confidence after facing the wrath of shareholders over the fiasco of its investment in Greek telecoms company Forthnet.
Neither I nor my board have a crystal ball to foresee the future
As a result of this failed investment – which cost it €62.3 million – the company made a loss of €45.2 million in 2011.
Irate shareholders demanded that the board shoulder responsibility for the loss, which has forced the company to forfeit its dividend payment this year.
One person sarcastically proposed that the directors should forfeit their remuneration in solidarity with shareholders.
But despite this bad news from Greece, Go’s chairman, Deepak Padmanabhan, told AGM that there was light at the end of the tunnel and the prospects were good.
When the investment was made in 2008, no one could have predicted the situation that would evolve in Greece.
He said the investment was originally aimed at strengthening Go’s position and enabling it to grow beyond Malta’s “small and limited market”.
The investment looked promising before the Greek crisis sparked off halfway through 2010, hitting hard Go’s investment in Forthnet, of which it owns 42 per cent.
Describing the loss as a “major concern for all”, Mr Padmanabhan said the board had taken the decision to invest in the Greek company after consulting with Credit Suisse and Meryll Lynch, two reputable firms.
“Neither I nor my board have a crystal ball to foresee the future,” he said.
He assured shareholders that “the worst is over” and that its investment in the company had now been reduced to some €3.4 million, “so this is the maximum that we could lose if anything else goes wrong”.
He said Forthnet was performing well and there was “an upside to this story”.
Despite the problems, one in five households in Greece used the company’s services and bundled services had increased by 35 per cent.
Also, Forthnet’s Greek subsidiary grew by 6.6 per cent last year. Replying to questions, Mr Padmanabhan said the company had not looked into selling its remaining shares in Forthnet and neither did the board have a contingency plan if Greece left or was made to leave the Eurozone.
Go has outstanding bank loans of €68 million which must be paid up by 2015.
According to chief financial officer Edmond Brincat, the company is liquid enough to make the repayments at least for the next two years.
He said that negotiations were underway with the banks over a repayment programme. Mr Brincat explained that the company had spent €27.6 million on early retirement schemes over the past six years, enabling the company to save €10 million in wages annually. The head-count was down to 1,000.
Asked by stockbroker Edward Rizzo whether the company’s heavy investment in rights for sporting events such as Serie A and Champions League was worth it, chief executive David Kay confirmed they cost the company a lot of money but declined to say how many subscribers Go had, saying this information was commercially sensitive.
He was also asked about an ex-gratia payment of €250,000 handed to a chief officer, saying it was “perfectly normal” and that this was a “negotiated settlement”.
The Forthnet debacle prompted shareholders to file six resolutions, including one in which they called for a discussion on the decision to skip dividend payments for 2011. They called for a revised dividend policy based on the company’s annual cash surpluses.
Mr Brincat said the company’s reaction to this was that if the company had a surplus of cash, it should be re-invested.
The shareholders also asked for a resolution enabling the company to adopt a share buy-back programme.
Other resolutions called on the board to seek approval of at least three-quarters of shareholders before any further investments in Forthnet or any such other foreign investment. However, neither of the resolutions garnered much support.