PHILIPSBURG – Telecom provider TelEm is in deep trouble, it appears from a letter it sent to the labor unions on Monday (June 1) about the decision to cut employee-salaries by 12.5 percent. The real situation at the company is at odds with the government’s assessment of the need for financial assistance to government-owned companies in its stimulus plan: “Airport, TelEm and GEBE have minimal impact and are not included at this time.”
While the government made this statement in its plan on April 19, the information StMaartenNews.com received about TelEm financial position tells a different story. Here is our analysis.
In 2008, the company still recorded a net result of 4.1 million guilders ($2.3 million) and its EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was 27.9 million ($15.6 million). In 2015, the net result peaked at 6.9 million ($3.85 million), though EBITDA slumped to 20.8 million ($11.6 million). Then Hurricane Irma hit: in 2017 TelEm recorded a loss of 13.7 million ($7.65 million) and EBITDA went negative for the first time: minus 2 million (-$1.1 million). In 2018 the bleeding stopped a little bit, but the net result was still 10.7 million ($5.98 million) negative, while EBITDA dipped to minus 3.3 million (-$1.8 million).
The results for 2019 are not known yet, but the company expects they will deteriorate further because of a decrease in international rates and minutes, roaming, and voice revenue (due to the use of Whatsapp and Facetime). TelEm also faces major repair costs to the damaged SMPR-1 submarine cable, high insurance costs, and increased competition from UTS since it was taken over by Liberty.
After Irma, an undrawn loan of 9 million guilders ($5 million) from the European Investment Bank was canceled. Today’s reality: TelEm’s expenses are higher than its revenue.
All this will put the payment of bonuses on ice for a long time, given the fact that, according to the letter signed by director Kendal Dupersoy, this will only be possible once EBITDA is at least 14 million guilders ($7.8 million). To get to that point, TelEm needs a turnaround worth $10.6 million. Under the current conditions caused by the corona-virus crisis that is not going to happen any time soon.
Dupersoy’s letter to the unions is lacking one critical component: a statement about the requirement that top salaries do not exceed 130 percent of the adjusted prime minister’s salary. Possibly this has been left out because it is not subject to negotiations with the unions.
If TelEm management does honor this part of the conditions though, it would set the maximum salary for its top earners at 19,063 guilders per month. According to the 2020 budget, the prime minister’s annual gross salary is 219,962 guilders ($122,884) or 18,330 guilders ($10,240) per month. A 25 percent cut would bring this down to 14,664 guilders ($8,192) and 130 percent of that amount is 19,063 guilders ($10,650).
TelEm has given the unions until Wednesday (June 3) to come up with alternative cost-cutting measures.
As it stands now, the company intends to terminate cost of living adjustments (COLA), salary increases, and – per January 1, 2021 – the group savings plan. Salaries will be decreased by 12.5 percent “across the board,” while bonuses will no longer be paid out. Expenditures for travel and training will be slashed by 50 percent and vacancies due to retiring employees will not be filled.
Dupersoy’s letter mentions eight additional options for cost-cutting measures. Among them are rent, building maintenance, contractor and consultancy fees, advertising and marketing, and legal fees.
###
Related links:
SMCU union rejects TelEm’s pay cut proposal
Union wants forensic audit at TelEm reinstated
Reply letter SMCU union to TelEm
Telem sends letter to union; all salaries to be cut by 12,5%
TelEm Letter to Union re decrease labor conditions
Stimulus plan asks Netherlands for 254 million
