FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of: August 1998
-----------
TRICOM, S.A.
(Translation of registrant's name into English)
AVENIDA LOPE DE VEGA NO. 95, SANTO DOMINGO, DOMINICAN REPUBLIC
(Address of principal executives offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
----------- -----------
Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.
Yes No X
----------- -----------
If "Yes" is marked, indicate below the file number assigned
to the registrant in connection with Rule 12g3-2(b): 82-
---------
<PAGE>
TRICOM, S.A.
QUARTERLY REPORT
FOR THE
SECOND QUARTER
ENDED
JUNE 30, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INTRODUCTION . . . . . . . . . . . . . . . . . . . . 1
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . 2
Consolidated Balance Sheet as of
December 31, 1997 and June 30, 1998 (unaudited) . . . 2
Consolidated Statements of Operations
Three Months and Six Months Ended June 30, 1997
and 1998 (unaudited) . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1998
(unaudited) . . . . . . . . . . . . . . . . . . . . . 5
Note to Financial Statements . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION . . . . . . . . 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK . . . . . . . . . . . . . . . . . . . . 15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS . . . . . 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K . . . . . . . . . 16
<PAGE>
GENERAL INTRODUCTION
Unless the context indicates otherwise, all references to
(i) the "Company" or "TRICOM" refer to TRICOM, S.A. and its
consolidated subsidiaries and their respective operations, and
include TRICOM's predecessors, and (ii) "GFN" refers to GFN
Corporation Ltd. and its direct and indirect subsidiaries, other
than the Company and its subsidiaries, and include GFN's
predecessors.
PRESENTATION OF CERTAIN FINANCIAL INFORMATION
The Company prepares its consolidated financial statements
in conformity with generally accepted accounting principles in
the United States. The Company adopted the United States dollar
as its functional currency effective January 1, 1997.
In this Quarterly Report references to "$," "US$" or "U.S.
dollars" are to United States dollars, and references to
"Dominican pesos" or "RD$" are to Dominican pesos. This
Quarterly Report contains translations of certain Dominican peso
amounts into U.S. dollars at specified rates solely for the
convenience of the reader. These translations should not be
construed as representations that the Dominican peso amounts
actually represent such U.S. dollar amounts or could be converted
into U.S. dollars at the rate indicated. Unless otherwise
stated, Dominican peso amounts that appear in this Quarterly
Report have been translated into United States dollars at an
exchange rate of RD$15.23 = US$1.00, the average of prices of one
U.S. dollar quoted by certain private commercial banks (the
"Private Market Rate") as reported by the Central Bank of the
Dominican Republic on June 30, 1998, the date of the most recent
financial information included in this Quarterly Report. The
Federal Reserve Bank of New York does not report a noon buying
rate for Dominican pesos. On August 10, 1998, the Private Market
Rate was RD$15.42 = US$1.00.
FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report which are
not historical facts are forward-looking statements that involve
risks and uncertainties. Management cautions the reader that
these forward-looking statements are only predictions; actual
events or results may differ materially as a result of risks
facing the Company. Such risks include, but are not limited to,
the following factors: competition; declining rates for
international long distance traffic; opposition to increased
rates for basic local service; the Company's significant capital
expenditure requirements and its need to finance such
expenditures; the inability of the Company to expand its local
access line network in a timely manner and within the amount
budgeted for such capital expenditure program; the inability of
the Company to manage effectively its rapid expansion; the
continued growth of the Dominican economy, demand for telephone
services in the Dominican Republic and moderation of inflation;
and the continuation of a favorable political and regulatory
environment in the Dominican Republic.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1997 AND JUNE 30, 1998 (UNAUDITED)
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
(AUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash
equivalents . . . . . US$ 5,732,505 US$ 32,753,979
Accounts receivable:
Customers . . . . . . . . 5,612,123 3,565,443
Carriers . . . . . . . . 5,546,399 5,583,773
Related parties . . . . . 625,248 71,131
Officers and employees . 200,294 226,328
Current portion of
long-term
accounts receivable . . 281,382 23,994
Other . . . . . . . . . . 3,525,123 8,608,440
----------- -----------
15,790,569 18,079,109
Allowance for doubtful
accounts . . . . . . . . (668,827) (466,162)
----------- -----------
Accounts
receivable, net 15,121,742 17,612,947
Current portion of
pledged
securities . . . . . 22,750,000 22,750,000
Inventories, net . . . 5,633,477 11,135,222
Prepaid expenses . . . 2,518,052 1,817,251
----------- -----------
Total current
assets . . . . . 51,755,776 86,069,399
----------- -----------
Long-term accounts
receivable . . . . . . . 966,592 548,120
Unearned interest . . . . (204,576) (84,081)
----------- -----------
Long-term accounts
receivable, net . . . 762,016 464,039
----------- -----------
Investments:
Pledged securities . 53,018,390 41,103,773
Other . . . . . . . 1,796,521 1,780,165
----------- -----------
Total investments 54,814,911 42,883,938
----------- -----------
Property and equipment,
net . . . . . . . . . . 202,977,596 272,604,535
Other assets at cost,
less accumulated
amortization . . . . . . 10,833,238 10,855,873
----------- -----------
TOTAL ASSETS . . . . . . US$321,143,537 US$412,877,784
============== ==============
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<PAGE>
TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
DECEMBER 31, 1997 AND JUNE 30, 1998 (UNAUDITED)
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
(AUDITED) (UNAUDITED)
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term obligations . US$ -- US$ --
Notes payable:
Borrowed funds-banks . 5,905,005 4,427,331
Borrowed funds-related
parties . . . . . . . 4,849,818 2,328,308
Borrowed funds-short
term . . . . . . . . -- --
----------- -----------
10,754,823 6,755,639
----------- -----------
Accounts payable:
Carriers . . . . . . . 2,327,768 3,026,109
Suppliers . . . . . . 17,746,637 35,963,482
Related parties . . . -- --
Other . . . . . . . . 1,023,478 945,637
----------- -----------
21,097,883 39,935,228
Other liabilities . . . 3,039,761 3,989,693
Accrued expenses . . . . 12,017,371 12,890,855
----------- -----------
Total current
liabilities . . . 46,909,838 63,571,415
----------- -----------
Reserve for severance
indemnities . . . . . . . 140,641 110,575
Long-term debt:
Carifa loan (long term
loan) . . . . . . . . . 32,000,000 32,000,000
Senior Notes . . . . . . 200,000,000 200,000,000
----------- -----------
Total liabilities . 279,050,479 295,681,990
----------- -----------
Shareholders' equity:
Class A Common Stock at
par value at RD$10:
Authorized 55,000,000
shares; 5,700,000 shares
issued at June 30, 1998 -- 3,750,000
Class B Stock at par
value RD$10:
Authorized 22,517,095
shares at
December 31,1997 and
21,044,544 shares at
June 30, 1998;
19,390,528 shares
issued at
December 31, 1997 and
19,144,544 issued at
June 30,
1998 . . . . . . . . 43,357,343 12,595,095
Paid-in-capital, excess
over par -- 94,638,174
Legal reserve . . . . . 600,233 600,233
Retained earnings
(deficit) . . . . . . . 3,147,997 718,290
Period net income (loss) (2,429,707) 6,917,759
Equity adjustment for
foreign currency
translation . . . . . . (2,023,757) (2,023,757)
----------- -----------
42,652,109 117,195,794
Less treasury stock at
cost, 245,985 shares . (559,051) --
----------- -----------
42,093,058 117,195,794
TOTAL LIABILITIES &
SHAREHOLDERS EQUITY . . .US$ 321,143,537 US$ 412,877,784
================ ================
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<PAGE>
TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------
1997 1998 1997 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Operating
revenues:
Toll . . . . .US$4,009,494 US$4,328,095 US$7,375,399 US$8,861,872
International
settlement . 8,660,507 12,655,827 16,705,734 23,499,289
Local service 1,397,721 3,032,586 2,272,123 5,714,210
Cellular . . . 2,949,826 5,055,764 5,418,509 9,291,410
Paging . . . . 1,333,436 1,182,860 2,489,682 2,446,976
Sale and lease
of equipment 1,668,249 823,046 3,385,775 1,820,432
Installations 1,158,194 3,611,023 1,717,235 6,008,559
Other . . . . 3,426 7,026 6,609 69,163
--------- --------- --------- ---------
Total
operating
revenues . 21,180,853 30,696,227 39,371,066 57,711,911
Operating costs:
Satellite
connections
and carrier . 7,539,113 8,351,190 14,825,492 15,829,596
Network
depreciation 2,056,076 2,774,771 3,690,053 5,138,668
Expense in
lieu of
income taxes 1,469,996 2,217,531 2,695,108 4,144,411
General and
admini-
strative
expenses . . 6,115,509 8,478,721 10,279,489 15,924,523
Depreciation
expense . . . 112,661 769,630 601,549 1,406,896
Other . . . . 1,198,596 565,380 1,964,836 1,587,513
--------- --------- --------- ---------
Total
operating
costs . . . 18,491,951 23,157,223 34,056,527 44,031,607
---------- ---------- ---------- ----------
Operating
income . . 2,688,902 7,539,004 5,314,539 13,680,304
Other income
(expenses):
Interest
expense . . . (2,425,428) (3,876,498) (4,948,767) (8,242,009)
Interest
income . . . 85,934 1,264,436 152,395 2,442,431
Foreign
currency
exchange gain
(loss) . . . -- 21,386 -- (84,837)
Other . . . . 96,646 (441,261) 37,561 (878,130)
--------- --------- --------- ---------
Total other
expenses . . (2,242,848) (3,031,937) (4,758,811) (6,762,545)
---------- ---------- ---------- ----------
Net earnings . . US$ 446,054 US$ 4,507,067 US$ 555,728 US$ 6,917,759
=========== ============= =========== =============
Earnings per
share . . . . . US$ 0.03 US$ 0.21 US$ 0.03 US$ 0.33
=========== ============ =========== ============
Weighted average
number of shares
outstanding . . 16,056,502 21,044,544 16,056,502 21,044,544
=========== ============ =========== ============
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<PAGE>
TRICOM, S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------------------
1997 1998
---- ----
(UNAUDITED) (UNAUDITED)
Cash flows from operating
activities:
Cash received from
customers . . . . . . . . US$ 50,571,076 US$ 54,462,872
Cash paid to suppliers and
employees . . . . . . . . (26,940,693) (16,912,327)
Cash received from (paid
to) related parties . . . 81,173 554,117
Interest paid . . . . . . (4,824,638) (8,362,504)
Interest received on
deposits . . . . . . . . 152,395 2,442,431
Expense in lieu of income
tax paid . . . . . . . . (2,695,107) (4,144,411)
Other income (expenses),
net . . . . . . . . . . . 37,560 (962,969)
---------- ----------
Net cash provided by
(used in) operating
activities . . . . . . 16,381,766 27,077,209
Cash flows from investment
activities:
Acquisition of investments (135,655) --
Cancellation of
investments . . . . . . . -- 11,930,974
Acquisition of property
and equipment . . . . . . (32,774,651) (76,172,502)
Cash received on sale of
fixed assets . . . . . . 2,101 --
---------- ----------
Net cash used in
investment activities . (32,908,205) (64,241,528)
Cash flows from financing
activities:
Borrowed funds (paid to)
from banks . . . . . . . 19,514,324 (1,477,674)
Principal payments to
banks . . . . . . . . . . (22,349,719) --
Borrowed funds from
related parties . . . . . 2,942,914 (2,521,510)
Principal payments to
related parties . . . . . (6,242,512) --
Short-term obligations . . (487,973) --
Issuance (redemption) of
short-term bonds . . . . 14,089,670 --
Redemption of short term
bonds . . . . . . . . . . (8,843,886) --
Issuance of common stock . 20,000,000 68,184,977
---------- ----------
Net cash provided (used)
by financing activities 18,622,818 64,185,793
Effect of exchange rate
changes on cash . . . . . . -- --
Net increase (decrease) in
cash and cash equivalents . 2,096,379 27,021,474
Cash and cash equivalents
at beginning of the year 4,291,804 5,732,505
Cash and cash equivalents at
end of the period . . . . . US$ 6,388,183 US$ 32,753,979
============= ==============
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<PAGE>
NOTE 1 - BASIS OF PRESENTATION
The Company considers that all adjustments (all of which are
normal recurring accruals) necessary for a fair statement of
financial position and results of operations for these periods
have been made; however, results for such interim periods are
subject to year-end audit adjustments. Results for such interim
periods are not necessarily indicative of results for a full
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
COMPANY OVERVIEW
TRICOM is the sole alternate provider of diversified
telecommunications services in the Dominican Republic. TRICOM
commenced operations as a low-cost international long distance
provider in 1992 and has since expanded to providing local
service, national long distance, cellular, paging, Internet
access and value-added services. The Company believes that the
Dominican Republic represents an attractive market for
telecommunications services due to substantial unmet demand for
local services, high volumes of international traffic, a rapidly
growing economy, and a regulatory environment that fosters
competition. The Company has developed a substantial presence in
the international long distance market for the Dominican Republic
and has constructed a cellular and paging network which covers
approximately 80% of the country's population. In addition,
TRICOM has been aggressively expanding its basic local phone
service business since the fourth quarter of 1996. As a result
of these efforts, the Company has achieved significant growth,
with operating revenues increasing from US$1.9 million in 1992,
to US$90.1 million in 1997.
TRICOM is controlled by GFN and Motorola, Inc. ("Motorola").
GFN, one of the Dominican Republic's largest holding companies
with interests in media, banking, credit cards and insurance,
beneficially owns 60% of the issued and outstanding shares of
Class B Stock and Motorola beneficially owns 40% of the issued
and outstanding shares of Class B Stock. Each share of Class B
Stock entitles the holder thereof to cast ten votes while each
share of Class A Common Stock entitles the holder thereof to cast
one vote.
TRICOM is a leading participant in the large market for
international long distance traffic between the Dominican
Republic and the United States. The Company has operating
agreements with all major facilities-based international carriers
responsible for international long distance traffic between the
Dominican Republic and the United States, and also has agreements
with numerous resellers which account for an increasing share of
the total traffic between the two countries. In January 1997,
the Company commenced operations in the United States through its
wholly owned subsidiary TRICOM USA, Inc. ("TRICOM USA"), a
facilities-based international and resale carrier. TRICOM USA
operates an international gateway switch in New York through
which it provides international carrier services to resellers.
TRICOM USA also markets prepaid international long-distance cards
to customers living in the New York metropolitan area, Florida,
Massachusetts, Puerto Rico and the U.S. Virgin Islands.
The Company implemented a local service expansion program
beginning in the fourth quarter of 1996. The Company expanded its
local access line network to 60,419 local access lines at June
30, 1998, including 43,348 net local access lines installed since
January 1, 1997. The Company anticipates installing
approximately 35,000 local access lines in 1998. Since
implementing its local service expansion program, the Company
also increased its cellular network capacity and cellular service
capabilities and expanded the number of cellular subscribers from
16,136 at December 31, 1996 to 76,095 at June 30, 1998.
The Company derives its operating revenues primarily from toll
revenues, international settlement revenues, cellular services,
paging services, local services, the sale and lease of equipment
and installations. The components of each of these services are
as follows:
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<PAGE>
Toll revenues are amounts received by the Company from its
customers in the Dominican Republic for international and
domestic long distance calls as well as interconnection
charges received from Compania Dominicana de Telefonos C. por
A., the dominant local service provider ("Codetel"). Toll
revenues are generated by retail telephone centers, large
corporate accounts, residential and commercial customers,
calling card users and cellular subscribers. Toll revenues are
recognized as they are billed to customers, except that
revenues from prepaid calling cards are recognized as the
calling cards are used or expire.
International settlement revenues represent amounts recognized
by the Company for termination of traffic from foreign
telecommunications carriers to the Dominican network.
Local service revenues consist of wireline rent, local
measured service and charges for CLASS services or vertical
features, including call forwarding, three-way calling, call
waiting and voice mail, as well as calling party pays revenues
and revenues from other miscellaneous wireline services.
Cellular revenues represent fees received for mobile cellular
services, including interconnection charges for calls incoming
to the Company's cellular subscribers, but excluding
international long distance calls generated by
cellular units. Cellular fees consist of fixed monthly access
fees, per minute usage charges and additional charges for
custom or vertical features, including call waiting, call
forwarding, three-way calling and voice mail, and for other
miscellaneous cellular services.
Paging revenues consist of fixed monthly charges for
nationwide service and use of paging equipment and
activation fees.
Revenues from the sale and lease of equipment consist of
sales and rental fees charged for customer premise
equipment, including private branch exchanges and key
telephone systems, residential telephones, cellular handsets
and paging units. Since late 1996, the Company has sold only
such equipment.
Installation revenues consist of fees charged by the Company
for installing local access lines, private branch exchanges
and key telephone systems as well as fees for activating
cellular handsets.
Other revenues consist of revenues that are not generated
from the Company's core business, including commissions
received for providing package handling services for a
courier, commissions received for collection services for
utility companies and revenues from miscellaneous product
sales such as magazines and snacks.
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<PAGE>
RESULTS OF OPERATIONS FOR THE THREE- AND SIX-MONTH PERIODS ENDED
JUNE 30, 1998 COMPARED WITH THE THREE- AND SIX-MONTH PERIODS
ENDED JUNE 30, 1997
The following table sets forth the percentage contribution of
each category of revenues to total operating revenues for the
periods indicated:
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1998(1) 1997 1998
---- ------- ---- ----
Toll . . . . . 18.9% 14.1% 18.7% 15.4%
International
settlement . . 40.9 41.2 42.4 40.7
Local service . 6.6 9.9 5.8 9.9
Cellular . . . 13.9 16.5 13.8 16.1
Paging . . . . 6.3 3.9 6.3 4.2
Sale and lease
of equipment . 7.9 2.7 8.6 3.2
Installations . 5.5 11.8 4.4 10.4
Other . . . . . 0.0 0.0 0.0 0.1
(1) Percentages do not add up to 100% due to rounding.
The following table sets forth certain items in the statements
of operations expressed as a percentage of total operating
revenues for the periods indicated:
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED MARCH 31,
-------------- --------------
1997 1998 1997 1998
---- ---- ---- ----
Operating costs . 87.3% 75.4% 86.5% 76.3%
Operating income 12.7 24.6 13.5 23.7
Interest expense,
net . . . . . . (11.1) (8.5) (12.2) (10.1)
Other income
(expenses) . . . (10.6) (9.9) (12.1) (11.7)
Net earnings . . 2.1 14.7 1.4 12.0
OPERATING REVENUES. The Company's total operating revenues
increased 46.6% to US$57.7 million for the six-month period ended
June 30, 1998 (the "1998 Interim Period") from US$39.4 million
for the six-month period ended June 30, 1997 (the "1997 Interim
Period"), and by 44.9% to US$30.7 million for the three-month
period ended June 30, 1998 (the "1998 Second Quarter") from
US$21.2 million for the three-month period ended June 30, 1997
(the "1997 Second Quarter"). TRICOM attributes much of this
growth to increased international settlement revenues generated
by TRICOM USA, the effects of its local access network expansion
program and the introduction of the Company's prepaid cellular
program.
Toll. Toll revenues increased 20.2% to US$8.9 million for
the 1998 Interim Period from US$7.4 million for the 1997 Interim
Period, and 7.9% to US$4.3 million for the 1998 Second Quarter
from US$4.0 million for the 1997 Second Quarter. The growth in
toll revenues was attributable to the increase by 68.5% in
domestic long distance minutes to 9.1 million minutes for the
1998 Interim Period from 5.4 million minutes for the 1997 Interim
Period, and by 62.1% to 4.6 million minutes for the 1998 Second
Quarter from 2.8 million minutes for the 1997 Second Quarter due
to a higher number of local access lines in service. The increase
in toll revenues also was attributable to higher outbound
international traffic. Outbound international minutes increased
by 10.4% to 10.8 million minutes for the 1998 Interim Period from
9.8 million minutes for the 1997 Interim Period and by 3.2% to
5.2 million minutes for the 1998 Second Quarter from 5.1 million
minutes for the 1997 Second Quarter, reflecting increased traffic
volume from the Efectiva prepaid calling card and from the
increased number of local access lines, partially offset by the
reduction of traffic from retail telephone centers. The Efectiva
prepaid calling card and local access lines accounted for 30.4%
and 29.4%, respectively, of the total outbound international
minutes for the 1998 Interim Period compared to 27.8% and 21.1%,
respectively, for the 1997 Interim Period. Interconnection
revenues related to domestic and international long distance
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<PAGE>
traffic also increased due to the growth of the Company's local
access line installed base. Interconnection revenues increased
by approximately 86.7% to US$1.4 million for the 1998 Interim
Period from US$765,000 for the 1997 Interim Period and by
approximately 62.4% to US$743,000 for the 1998 Second Quarter
from US$458,000 for the 1997 Second Quarter. Toll revenues
represented 15.4% of total operating revenues for the 1998
Interim Period compared to 18.7% of total operating revenues for
the 1997 Interim Period, and 14.1% of total operating revenues
for the 1998 Second Quarter compared to 18.9% of total operating
revenues for the 1997 Second Quarter.
International settlement. International settlement revenues
increased 40.7% to US$23.5 million for the 1998 Interim Period
from US$16.7 million for the 1997 Interim Period, and increased
by 46.1% to US$12.7 million for the 1998 Second Quarter from
US$8.7 million for the 1997 Second Quarter. The increase in
settlement revenues was attributable to the increase of inbound
minutes by 87.7% to 92.2 million for the 1998 Interim Period from
49.1 million minutes for the 1997 Interim Period, and by 108.5%
to 51.4 million minutes for the 1998 Second Quarter from 24.6
million minutes for the 1997 Second Quarter. The increases in
the number of minutes in 1998 reflected new volume based
agreements and the contribution of TRICOM USA's operations in the
United States. TRICOM USA accounted for 53.4% and 50.9% of the
total inbound minutes in the 1998 Interim Period and the 1998
Second Quarter, respectively. Inbound minutes generated by
TRICOM USA during the 1998 Interim Period and the 1998 Second
Quarter included 42.8 million minutes and 21.5 million minutes
attributable to the provision of facilities by TRICOM USA to
resellers, respectively, and 6.5 million minutes and 4.6 million
minutes attributable to prepaid calling cards distributed in the
United States during the 1998 Interim Period and the 1998 Second
Quarter, respectively.
Settlement rates declined in the 1998 Interim Period to an
average rate of US$0.22 per minute from US$0.30 per minute during
the 1997 Interim Period as a result of increased competition in
the market for international long distance service between the
Dominican Republic and the United States. Settlement rates for
traffic between the United States and the Dominican Republic have
declined over the past five years, and the Company anticipates
that competitive and regulatory pressures could push settlement
rates lower. TRICOM has been able to increase revenues from the
provision of international long distance services by increasing
the volume of international traffic that it handles. Future
decreases in settlement rates, without corresponding increases in
the Company's long distance traffic from the United States would
reduce the Company's international settlement revenues, adversely
affect the profit margins that the Company realizes on such
traffic and could have a material adverse effect on the Company's
business, financial condition and results of operations.
International settlement revenues represented 40.7% of total
operating revenues for the 1998 Interim Period compared to 42.4%
of total operating revenues for the 1997 Interim Period, and
41.2% of total operating revenues for the 1998 Second Quarter
compared to 40.9% of total operating revenues for the 1997 Second
Quarter.
Local service. Local service revenues increased 151.5% to
US$5.7 million for the 1998 Interim Period from US$2.3 million
for the 1997 Interim Period, and 117.0% to US$3.0 million for the
1998 Second Quarter from US$1.4 million for the 1997 Second
Quarter. The increases resulted from the growth in the number of
local access lines in service, reflecting the Company's ongoing
program to expand its local access network initiated in 1996,
combined with a higher average monthly rent charged to customers.
During the 1998 Interim Period, the Company installed 17,224
net local access lines, including 8,838 net local lines during
the 1998 Second Quarter, compared to 11,371 net local access
lines installed during the 1997 Interim Period, including 6,538
net local lines during the 1997 Second Quarter. The number of net
local access line additions during the 1998 Second Quarter
represents the highest number of net line additions in any
quarter since TRICOM began installing local access lines in 1994.
At June 30, 1998 the Company had 60,419 local access lines in
service compared to 28,442 local access lines in service at June
30, 1997. As a result, interconnection revenues related to
local calls received from Codetel increased 74.9% to US$488,000
for the 1998 Interim Period from US$279,000 for the 1997 Interim
Period, and 62.6% to US$254,000 for the 1998 Second Quarter from
US$156,000 for the 1997 Second Quarter.
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Beginning in August 1997, the Company increased the average
monthly rent for local access lines by offering a variety of
customer defined packages for local service which range in price
from RD$133 (US$9.00) per month to RD$400 (US$26.00) per month,
depending upon the services offered. Local service revenues
represented 9.9% of total operating revenues for the 1998 Interim
Period compared to 5.8% of total operating revenues for the 1997
Interim Period, and 9.9% of total operating revenues for the 1998
Second Quarter compared to 6.6% of total operating revenues for
the 1997 Second Quarter.
Cellular. Cellular revenues increased by 71.5% to US$9.3
million for the 1998 Interim Period from US$5.4 million for the
1997 Interim Period, and by 71.4% to US$5.1 million for the 1998
Second Quarter from US$2.9 million for the 1997 Second Quarter.
This increase was attributable to the growth of airtime minutes,
a result of a higher average subscriber base. Airtime minutes
increased 37.8% and 30.5% to 44.6 million minutes for the 1998
Interim Period from 32.3 million minutes for the 1997 Interim
Period and 22.9 million minutes for the 1998 Second Quarter from
17.6 million minutes for the 1997 Second Quarter. In addition,
the average number of cellular subscribers during the 1998
Interim Period was higher than for the 1997 Interim Period, as
the Company added 34,988 net subscribers, including 20,109 net
subscribers during the 1998 Second Quarter, compared to 7,385 net
subscribers added in the 1997 Interim Period, including 4,178 net
subscribers added during the 1997 Second Quarter. The number of
cellular subscribers increased at June 30, 1998 by 223.5% to
76,095 from 23,521 at June 30, 1997. The Company attributes the
increase in cellular airtime and the number of subscribers to the
introduction of prepaid cellular services and the Amigo prepaid
card for cellular calls in the third quarter of 1997. Prepaid
cellular services generated approximately 44% of the Company's
total airtime minutes in the 1998 Interim Period.
The Company's average monthly churn rate for cellular services
was 3.2% for the 1998 Interim Period compared to 3.9% for the
1997 Interim Period and 2.8% for the 1998 Second Quarter compared
to 4.1% for the 1997 Second Quarter. The Company calculates
churn by dividing the number of subscribers disconnected during a
given period by the sum of subscribers at the beginning of each
month during such period.
Interconnection revenues associated with airtime traffic
received from Codetel increased by 45.8% to US$735,000 in the
1998 Interim Period from US$504,000 in the 1997 Interim Period
and by 51.1% to US$418,000 in the 1998 Second Quarter from
US$277,000 in the 1997 Second Quarter due to a higher volume of
incoming minutes received by prepaid cellular subscribers, as
well as to a larger subscriber base.
Cellular revenues represented 16.1% of total operating
revenues for the 1998 Interim Period compared to 13.8% of total
operating revenues for the 1997 Interim Period, and 16.5% of
total operating revenues for the 1998 Second Quarter compared to
13.9% for the 1997 Second Quarter.
Paging. Paging revenues decreased 1.7% to US$2.4 million for
the 1998 Interim Period compared to US$2.5 million for the 1997
Interim Period, and by 11.3% to US$1.2 million for the 1998
Second Quarter from US$1.3 million for the 1997 Second Quarter.
The decrease in the 1998 Interim Period reflected a decline in
the average revenue per paging subscriber during the first six
months of 1998 from the average revenue per paging subscriber
during the first six months of 1997, which resulted from
increased competition in the market. Although, the Company only
added 629 net paging subscribers during the 1998 Interim Period,
including 124 net paging subscribers during the 1998 Second
Quarter, compared to 3,625 net paging subscribers added in the
1997 Interim Period, including 1,790 net paging subscribers in
the 1997 Second Quarter, the number of paging subscribers
increased by 6.7% to 28,456 at June 30, 1998 from 26,661 at June
30, 1997. The Company's average monthly churn rate for paging
services was 3.4% for the 1998 Interim Period compared to 3.6%
for the 1997 Interim Period and 3.4% for the 1998 Second Quarter
compared to 3.7% for the 1997 Second Quarter. Paging revenues
represented 4.2% of total operating revenues for the 1998 Interim
Period compared to 6.3% of total operating revenues for the 1997
Interim Period, and 3.9% of total operating revenues for the 1998
Second Quarter compared to 6.3% for the 1997 Second Quarter. The
Company has determined that paging will not be a major focus of
its marketing program.
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Sale and lease of equipment. Revenues from the sale and lease
of equipment decreased 46.2% to US$1.8 million for the 1998
Interim Period from US$3.4 million for the 1997 Interim Period,
and by 50.7% to US$823,000 for the 1998 Second Quarter from
US$1.7 million for the 1997 Second Quarter. This decrease
reflected a lower number of cellular handsets sold, as a result
of the Company entering into arrangements for the distribution of
cellular service with major electronics retailers in conjunction
with the sale by them of handsets and paging units beginning in
the third quarter of 1997. The Company believes that these
arrangements will result in lower revenues from the sale by the
Company of cellular handsets units, but could increase revenues
from cellular services by increasing the number of the Company's
subscribers for such services. Sale and lease of equipment
revenues represented 3.2% of total operating revenues in the 1998
Interim Period compared to 8.6% of total operating revenues for
the 1997 Interim Period, and 2.7% of total operating revenues for
the 1998 Second Quarter compared to 7.9% of total operating
revenues for the 1997 Second Quarter.
Installations. Installation revenues increased 249.9% to
US$6.0 million for the 1998 Interim Period from US$1.7 million
for the 1997 Interim Period, and by 211.8% to US$3.6 million for
the 1998 Second Quarter from US$1.2 million for the 1997 Second
Quarter. This increase reflected the significant growth in the
number of local access line installations and cellular
activations as well as an increase in the installation fee per
local access line from RD$2,000 (US$131) to RD$4,000 (US$263) in
January 1998. During the 1998 Interim Period, the Company
installed 19,589 gross local access lines, including 10,036 gross
local access lines in the 1998 Second Quarter, compared to 14,158
gross local access lines installed for the 1997 Interim Period,
including 7,912 gross local access lines in the 1997 Second
Quarter, reflecting increased domestic market presence.
Installation revenues represented 10.4% of total operating
revenues in the 1998 Interim Period compared to 4.4% of total
operating revenues for the 1997 Interim Period, and 11.8% of
total operating revenues for the 1998 Second Quarter compared to
5.5% of total operating revenues for the 1997 Second Quarter.
OPERATING COSTS. Major components of operating costs are (i)
carrier costs, which include amounts owed to foreign carriers for
the use of their networks for termination of outbound traffic and
commissions paid to information providers, (ii) interconnection
costs, which are access charges paid to Codetel, (iii)
depreciation of network equipment and leased terminal equipment,
(iv) payments for international satellite circuit leases, (v)
expenses in lieu of income tax, (vi) general and
administrative expenses and (vii) depreciation expense.
The Company's operating costs increased
29.3% to US$44.0 million for the 1998 Interim Period from US$34.1
million for the 1997 Interim Period. Operating costs represented
76.3% of total operating revenues for the 1998 Interim Period
compared to 86.5% of total operating revenues for the 1997
Interim Period.
Satellite connections and carrier costs increased 6.8% to
US$15.8 million during the 1998 Interim Period compared to
US$14.8 million during the 1997 Interim Period. The increase in
satellite connections and carrier costs reflected a US$290,000
increase in interconnection costs to US$6.1 million in the 1998
Interim Period from US$5.8 million in the 1997 Interim Period, as
a result of the significant growth of inbound traffic and local
service from the Company's network to Codetel's network. In
addition, carrier costs increased by US$1.7 million to US$5.6
million in the 1998 Interim Period from US$3.9 million in the
1997 Interim Period due to higher volume of outbound traffic.
However, these increases were partially offset by a decline in
lease payments for switching facilities and satellite connections
by US$466,000 and by the decrease by US$264,000 in payments to
information providers. Lease payments for switching facilities
and satellite connections decreased by 18.1% to US$2.6 million in
the 1998 Interim Period from US$3.0 million in the 1997 Interim
Period due to costs savings for leased international facilities
that resulted with the commencement of operations of the
Antilles-I fiber optic cable. The Company paid commissions to
information providers in the 1998 Interim Period of US$1.2
million compared to US$1.5 million in the 1997 Interim Period as
a result of the reduction of such traffic.
Network depreciation and depreciation expense increased 39.3%
and 133.9% to US$5.1 million and US$1.4 million, respectively,
for the 1998 Interim Period from US$3.7 million and US$602,000,
respectively, for the 1997 Interim Period as a result of the
Company's continued investments in telephone plant and equipment.
Expense in lieu of income taxes increased by 53.8% to US$4.1
million for the 1998 Interim Period from US$2.7 million for the
1997 Interim Period, due to increased revenues, a portion of
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which were not subject to deductible access charges, including,
in particular, installation revenues. However, all the above
mentioned increases where partially offset by a decrease in other
costs to US$1.6 million for the 1998 Interim Period from US$2.0
million for the 1997 Interim Period primarily attributable to
lower costs of sale of equipment.
The Company's general and administrative expenses include
salaries and other compensation to personnel, building
depreciation charges, maintenance expenses, promotional and
advertising costs and other related costs. The Company's general
and administrative expenses increased by 54.9% to US$15.9 million
for the 1998 Interim Period from US$10.3 million for the 1997
Interim Period. The increases were primarily attributable to
higher personnel costs, other commissions, promotional and
advertising costs, and certain other costs. Personnel costs for
the 1998 Interim Period increased by 48.3% to US$6.1 million from
US$4.1 million for the 1997 Interim Period, reflecting the
operations of TRICOM USA and the Call Tel Corporation. At June
30, 1998 the Company had 1,182 employees compared to 758
employees at June 30, 1997. Other commissions increased by
US$1.9 million to US$2.0 million in the 1998 Interim Period from
US$133,000 in the 1997 Interim Period primarily resulting from
higher sales commissions related to the Amigo prepaid card.
Promotional and advertising costs increased by 56.9% to US$1.8
million in the 1998 Interim Period from US$1.1 million in the
1997 Interim Period, as a result of campaigns related to the
Amigo prepaid card. Other costs, including legal fees,
administrative services and maintenance costs, increased by 38.2%
to US$2.9 million in the 1998 Interim Period from US$2.1 million
in the 1997 Interim Period. In addition, the Company's provision
for uncollectible accounts remained stable, increasing to
US$648,000 for the 1998 Interim Period from US$636,000 for the
1997 Interim Period. General and administrative costs as a
percentage of total operating revenues increased to 27.6% for the
1998 Interim Period from 26.1% for the 1997 Interim Period.
For the 1998 Second Quarter, the Company's operating costs
increased 25.2% to US$23.2 million from US$18.5 million for the
1997 Second Quarter. However, as a percentage of total revenues,
operating costs decreased to 75.4% for the 1998 Second Quarter
from 87.3% for the 1997 Second Quarter. This increase is
attributable to increased interconnection costs as a result of
higher inbound traffic and local service calls from the Company's
network to Codetel's network, and higher carrier costs.
However, such expenses were offset by the reduced amount of
commissions paid to information providers and the decreased
leased payments for switching facilities and satellite
connections. Network depreciation and depreciation expense
increased as a result of the Company's continued network
investments. The Company's general and administrative expenses
increased by 38.6% to US$8.5 million for the 1998 Second Quarter
from US$6.1 million for the 1997 Second Quarter, mainly due to
higher personnel costs, other commisssions, promotional and
advertising and other costs. However, as a percentage of
operating revenues, general and administrative expenses decreased
to 27.6% for the 1998 Second Quarter from 28.9% for the 1997
Second Quarter.
OPERATING INCOME. Operating income increased 157.4% to
US$13.7 million for the 1998 Interim Period from US$5.3 million
for the 1997 Interim Period, and increased by 180.4% to US$7.5
million for the 1998 Second Quarter from US$2.7 million for the
1997 Second Quarter. The Company's operating income represented
23.7% of total operating revenues for the 1998 Interim Period
compared to 13.5% of total operating revenues for the 1997
Interim Period, and 24.6% of total operating revenues for the
1998 Second Quarter compared to 12.7% of total operating revenues
for the 1997 Second Quarter reflecting higher margins from local
service, cellular and international long distance services.
OTHER INCOME (EXPENSES). Other expenses increased 42.1% to
US$6.8 million for the 1998 Interim Period from US$4.8 million
for the 1997 Interim Period and by 35.2% to US$3.0 million for
the 1998 Second Quarter from US$2.2 million for the 1997 Second
Quarter, reflecting increases in net interest expense. Interest
expense increased 66.5% to US$8.2 million for the 1998 Interim
Period from US$4.9 million for the 1997 Interim Period and by
59.8% to US$3.9 million for the 1998 Second Quarter from US$2.4
million for the 1997 Second Quarter due to higher long term debt
outstanding as a result of the issuance of US$200 million Senior
Notes during the third quarter of 1997. Interest expense as a
percentage of total operating revenues increased to 14.3% for the
1998 Interim Period compared to 12.6% for the 1997 Interim
Period, and to 12.6% for the 1998 Second Quarter compared to
11.5% for the 1997 Second Quarter.
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<PAGE>
NET EARNINGS. Net earnings increased by US$6.4 million to
US$6.9 million, or US$0.33 per share, for the 1998 Interim Period
from US$556,000, or US$0.03 per share, for the 1997 Interim
Period and by US$4.1 million to US$4.5 million, or US$0.21 per
share, for the 1998 Second Quarter from US$446,000, or US$0.03
per share, for the 1997 Second Quarter, as a result of higher
operating income. The weighted average number of shares
outstanding at June 30, 1998 were 21,044,544 compared to
16,056,502 at June 30, 1997. Net earnings accounted for 12.0% of
total operating revenues for the 1998 Interim Period compared to
1.4% for the 1997 Interim Period and 14.7% of total operating
revenues for the 1998 Second Quarter compared to 2.1% of total
operating income for the 1997 Second Quarter.
EFFECTS OF INFLATION
The annual inflation rates in the Dominican Republic in 1995,
1996 and 1997 were 9.2%, 4.0% and 8.0%, respectively. To date,
the effects of inflation on TRICOM's operations have not been
significant.
CHANGE IN FUNCTIONAL AND REPORTING CURRENCY
Through December 31, 1996, the Company used the Dominican peso
as its functional and reporting currency. While a significant
portion of the Company's revenues, assets and liabilities
historically were denominated in U.S. dollars, a clear
determination of the functional currency was difficult, and the
Company used the Dominican peso as its functional currency.
However, in the Company's opinion, with the issuance of the
Senior Notes, the Company's cash flows and financial results of
operations are more appropriately presented in the U.S. dollar as
the functional currency. Effective January 1, 1997, the Company
changed its functional currency from the Dominican peso to the
U.S. dollar. The Company's financial statements for periods
prior to January 1, 1997 have not been restated for this change
in the functional currency. However, the Company did
retroactively change its reporting currency to the U.S. dollar.
The change in functional currency was made effective as of
January 1, 1997. The effect of the change was to decrease
results of operations by US$301,000 for 1997.
The Company anticipates that this change in functional
currency may diminish the impact of any future devaluation of the
Dominican peso against the U.S. dollar.
LIQUIDITY AND CAPITAL RESOURCES
Substantial capital is required to expand and operate the
Company's telephone networks. During 1997 Interim Period and the
1998 Interim Period, the Company expended US$32.8 million and
US$76.2 million, respectively, for capital expenditures. During
1997, the Company made capital expenditures for installation of
additional local access lines, expansion of the Company's
cellular and paging systems into areas not previously served and
expansion of international facilities. The Company currently
plans to make capital expenditures during 1998 of up to US$119.2
million, including approximately US$76.2 million expended through
June 30, 1998. The Company currently estimates that capital
expenditures relating to the installation of approximately 35,000
wire local access lines will total approximately US$36.1 million
for 1998. The Company anticipates expending approximately
US$24.5 million in 1998 to enhance its cellular network by adding
new cell sites and capacity to existing cell sites. The Company
also anticipates expending during 1998 approximately US$10.0
million to install switches in New York and Puerto Rico and to
expand its international circuit capacity and US$14.0 million for
other network improvements. The Company anticipates expending
approximately US$13.6 million for working capital purposes
related to the expansion program. However, the amounts to be
expended in 1998 will depend upon a number of factors, including
demand for the Company's services and competition in the
Company's various markets. Thereafter, the Company expects to
continue to expand its network in order to increase its
penetration of the residential and commercial markets.
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<PAGE>
As part of its local network expansion program, the Company
has tested and intends to deploy a fixed cellular system, called
a wireless local loop, or "WLL", during 1998 in order to
accelerate its expansion into the residential and commercial
markets. Based upon preliminary discussions with potential
vendors, the Company currently estimates that the funds required
for capital expenditures relating to the initial build-out of its
WLL in 1998 will total approximately US$21.0 million. However,
the cost could vary based upon a number of factors, including
vendor financing or discounts. The Company is considering
systems marketed by a number of vendors, including Motorola.
Upon completion of the initial build-out phase, the WLL system is
expected to cover approximately 70% of the area of Santo Domingo
and approximately 38% of the area of Santiago and will be capable
of serving approximately 14,000 subscribers. The Company
anticipates that the initial build-out of the WLL will take
approximately eight months from the date the Company purchases
the system. After the completion of the initial build-out of the
WLL, the Company expects to continue to expand its WLL in order
to increase its penetration of the residential and commercial
markets. The Company expects to finance the cost of the initial
build-out of the WLL with a portion of the US$68.7 million in net
proceeds received from the offering (the "ADR Offering") of
5,700,000 American Depositary Receipts which was consummated in
May 1998.
The Company anticipates that it will be able to meet its
operating and capital requirements with the net proceeds received
from the ADR Offering, cash flows from operating activities and
available borrowings under existing short-term credit facilities.
Management believes that the increased average maturity of the
Company's indebtedness will enhance the Company's operational
flexibility. Net cash provided by operating activities was
US$27.1 million and US$16.4 million for the 1998 Interim Period
and 1997 Interim Period, respectively. At December 31, 1997 and
June 30, 1998, the Company had positive working capital of US$4.8
million and US$22.5 million, respectively. However, if the
Company decides to accelerate further the expansion of its local
access network or if the Company's cash flow from operating
activities is lower than expected, the Company may need to obtain
additional financing and there can be no assurance that such
financing will be available. The payment of interest on the
Senior Notes for the first four interest periods has been funded
with investments that are held in an escrow account, which will
result in the enhancement of the Company's cash flow through
1999.
The Company had accounts receivable of US$18.1 million and
US$15.8 million and allowance for doubtful accounts of US$466,000
and US$669,000 at June 30, 1998 and December 31, 1997,
respectively.
The Company's total assets increased to US$412.9 million at
June 30, 1998 from US$321.1 million at December 31, 1997. The
Company's indebtedness was approximately US$238.8 million at June
30, 1998, of which US$6.8 million represented short-term
borrowings, US$200.0 million represented the Company's 11-3/8%
Senior Notes due 2004 (the "Senior Notes") and US$32.0 million
represented borrowings form the Caribbean Basin Projects
Financing Authority which had been funded by the issuance of
industrial revenue bonds (the "Carifa Bonds"). The Company has
irrevocably deposited with the trustee for the Carifa Bonds an
amount estimated to be sufficient to pay the principal amount of
the Carifa Bonds at their maturity in 1999 and to pay interest on
such industrial revenue bonds through such date. Shareholders'
equity increased to US$117.2 million at June 30, 1998 from
US$42.1 million at December 31, 1997, as a result of the ADR
Offering.
GFN and Motorola have guaranteed certain borrowings of the
Company in the past. As a condition to the completion of the
Senior Note offering, GFN and Motorola agreed in separate credit
support agreements to provide to the Company guarantees of
borrowings or arrange for it to receive term loans, letters of
credit and revolving credit facilities of up to US$25.0 million
and US$15.0 million, respectively. However, such shareholders
are not required by the credit support agreements to provide
guarantees or other financial support in excess of such amounts,
and, in any event, the obligations of such shareholders
thereunder expire after 1999. Such obligations are subject to
reduction in certain circumstances, including by the net proceeds
received by the Company from the sale of its capital stock. As a
result of the ADR Offering, GFN and Motorola no longer have any
credit support obligation pursuant to credit support agreements.
After June 30, 1998, the Company terminated a credit facility
with Citibank (the "Citibank Facility") which had permitted
TRICOM to borrow up to US$11.0 million. Until the ADR Offering,
Motorola had guaranteed payment of amounts borrowed under the
Citibank Facility, but Motorola informed the Company that it
would no longer provide guarantees following the ADR Offering.
At the time of termination, the Company repaid US$4.1 million
then outstanding under the Citibank Facility. In addition, GFN
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no longer provides guarantees of certain short-term credit
facilities with Dominican banks. The Company currently is
negotiating with international banks to obtain a credit facility
to replace the Citibank Facility. There can be no assurance that
the Company will be able to obtain a credit facility to replace
the Citibank Facility or, if it is obtained, that it will be on
terms as favorable as those terms provided in the Citibank
Facility. The inability to obtain a replacement facility could
adversely affect the Company's liquidity.
At June 30, 1998, the Company had approximately US$21.4
million available under short-term, U.S. dollar- and
peso-denominated credit facilities with Dominican banks.
The Company's total assets increased from US$18.9 million at
December 31, 1992 to US$321.1 million at December 31, 1997 and
US$412.9 million at June 30, 1998.
The Company has not engaged in transactions to hedge against
foreign currency or interest rate fluctuations.
IMPACT OF YEAR 2000
The Company is examining the potential problem of its computer
systems and applications failing or creating erroneous results
after 1999. Since October 1997, the Company has been testing and
modifying its computer systems so that they will function
properly when processing information that includes the year 2000
date and dates after the year 2000. TRICOM anticipates that it
will need to modify the software applications currently running
its billing and payment systems. During 1998, the Company will
implement financial applications developed by Oracle Corporation
that have solutions to the year 2000 problem already embedded
within such programs. The Company anticipates that it will not
incur material costs for its computer testing and modification
program. The Company does not believe that the year 2000
problem, if any faced by its suppliers, creditors or others will
have any material impact on the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Not applicable.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings to which the Company is a
party, other than routine litigation incidental to the business
of the Company which is not otherwise material to the business or
financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special shareholders meeting on May 7,
1998, at which the shareholders unanimously ratified the Board of
Director's resolutions approving the ADR Offering and related
transactions, approved TRICOM's 1998 Incentive Plan and elected
the following persons to serve as directors of the Company:
Arturo Pellerano Pena, Hector Castro Naboa, Marcos J. Troncoso,
Juan Felipe Mendoza, Richard Gasink, M. Arely Castellon,
Guillermo Monroy, Fernando Antonio Simo, Raisa Gil, Anibal de
Castro, Leonel Melo and Rosalia Prota.
ITEM 5. OTHER INFORMATION
On July 10, 1998, TRICOM's Board of Directors appointed
Fernando Antonio Rainieri and Jose Manuel Villalvazo to serve as
independent directors of the Company. Messrs. Rainieri and
Villalvazo are filling two vacancies left by the resignations of
Leonel Melo and Rosalia Prota on May 8, 1998, who served in such
positions on a temporary basis.
Fernando Antonio Rainieri has served as General Director and
advisor to the Central Bank of the Dominican Republic and as an
international advisor to the Inter-American Development Bank.
Mr. Rainieri has held positions as Executive Assistant at Gulf &
Western Americas Corporation and as the Dominican Republic's
Secretary of Tourism. In addition, he has served on the boards
of directors of several Dominican corporations. Mr. Rainieri
holds a Bachelor's degree in Business Administration and a degree
in marketing from Texas A & M University, College Station, Texas.
Jose Manuel Villalvazo has been an active member of the
wireless and satellite communications sectors. Mr. Villalvazo
co-founded Baja Cellular, the Band A cellular service provider in
the northwestern region of Mexico. He currently is the Chairman
and Chief Executive Officer of TECELMEX, a holding company with
interests in mobile communications, and he is the founder and
President of LEO ONE PANAMERICANA, a Mexican-based, low-earth
orbiting satellite service which provides mobile data services
throughout Latin America. Mr. Villalvazo has held other
positions in the communications industry, including as
Vice-Chairman of the Mexican Association of Cellular Telephone
Concessionaires (AMCEL), as Chairman and founder of the Latin
American Cellular Industry Association (ALACEL) and as a Member
of the Mexican delegation to the Inter-American
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Telecommunications Commission (CITEL). Mr. Villalvazo holds a
CPA and Masters of Business Administration from the University of
Mexico.
ITEM 6. EXHIBITS AND REPORTS ON FORM 6-K
(a) Exhibits.
None.
(b) Reports on Form 6-K. The Company filed a Report
on Form 6-K with the Securities and Exchange
Commission on May 15, 1998 reporting the results
of the three-month period ended March 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRICOM, S.A
Dated: August 13, 1998 By: /s/ Carl H. Carlson
---------------------------
Carl H. Carlson
Executive Vice President
and Member of the
Office of the President
