Thread: U.S. immigration debate hits First Data Western Union shares

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UPDATE 1-U.S. immigration debate hits First Data shares
Fri Jul 21, 2006 5:37 PM ET


By Dan Wilchins

NEW YORK, July 21 (Reuters) - Shares of First Data Corp. <FDC.N> fell 4.8 percent on Friday, their biggest one-day drop since 2003, after the company said debate about United States immigration policy was weighing on results in its Western Union division.

First Data said late on Thursday that second-quarter earnings rose 11 percent to a level in line with analysts' expectations.

However, First Data Chief Executive Ric Duques said in a conference call that immigrants, especially those without documentation, are increasingly concerned about wiring money back home because they do not want to attract government attention.

"Do I need to hold onto my cash? You would, if you were worried about paying back taxes, fines, or legal fees, or if a state government had seized remittances from people that cannot prove their legal residence," Duques said.

First Data said that this could weigh on its full year earnings.

"Investors had not appreciated the magnitude of the effect of immigration policy on Western Union's business," said John Kraft, an analyst at D.A. Davidson in Lake Oswego, Oregon.

The United States is in the midst of a national policy debate about immigration. The Senate has passed a bill that would offer amnesty to millions of undocumented immigrants already in the United States, but would also pay for measures to keep out new illegal immigrants.

Members of the House of Representatives, which in June passed a bill that would give more money to border security agencies to control illegal immigration, have heaped scorn on the Senate's plan to offer a path to citizenship for existing illegal immigrants.

State legislators have passed laws aimed at illegal immigrants, including a measure in Colorado requiring adults to show valid identification to apply for nonemergency government benefits.

If pressure on immigrants continues, First Data said it may post full-year earnings from continuing operations at the lower end of its previously forecast range of $2.35 to $2.42 a share.

In the second half of the year, First Data is spinning off Western Union, which is seen as a faster-growing business, from its other operations, which generate solid cash flow but do not grow as quickly.

First Data's shares fell $2.09 to closed at $41.76 on the New York Stock Exchange, their biggest one-day loss in percentage terms since October 2003.

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Immigration hurt money transfer business
New Mexico Business Weekly - 5:44 PM MDT Fridayby Renee McGawDenver Business Journal
Controversy over illegal immigration hurt Western Union's business in the second quarter, as immigrants in the United States became less willing to send money to their families in Mexico, the chief executive of Western Union's parent company, First Data Corp., said Friday.

"We estimate that the U.S. immigration activities in the second quarter negatively impacted Western Union's total revenue growth by 2 percent and total operating profit by 3 percent," said Ric Duques, CEO of Greenwood Village-based First Data (NYSE: FDC), in a conference call with analysts.

He said the well-publicized efforts by lawmakers to crack down on illegal immigration and tighten the U.S. border with Mexico had frightened both legal and illegal immigrants away from money-transfer offices.

"Most of these migrants come to the United States to find work and in many cases send money back to their family," Duques said. "The last thing these people want is to find themselves a target of controversy or suspicion. Even those in this country legally may now have concerns about their paperwork or undocumented family members."

Fear of harassment and arrest are prompting many migrants to hang onto their cash, Duques said.

"In May and June, more than 2,000 migrants were arrested across the United States," he said. "You can imagine the ripple effect that these arrests are having on the community... It's inconceivable that these developments would not have an impact on money transfer industry."

Mexico's central bank, Banco de Mexico, reported remittance transaction growth of 14 percent for April and May, down eight percentage points from 22 percent growth rate in the first quarter, Duques said.

First Data experienced a noticeable decline in transaction growth across all three of its money transfer brands -- Western Union, Orlandi Valuta and Vigo, Duques said.

Total Mexico transactions excluding Vigo grew 6 percent, compared with 17 percent growth in the first quarter, he said. Western Union-branded transactions to Mexico, excluding Orlandi Valuta and Vigo, increased 10 percent, compared with 23 percent in the first quarter. And Western Union's domestic money transfer business, including Latinos within the United States, grew 5 percent, compared with 5 percent growth in the first quarter, Duques said.

On Thursday, First Data reported earnings of $436 million, or 56 cents per share, up from $391.9 million, or 50 cents per share, in the same quarter a year earlier.

The company reaffirmed its previous full-year guidance of $2.35 to $2.42 per share, but said that it might come in at the lower end of that range if immigration issues continued to hurt Western Union business.

First Data plans to spin off the Western Union business in the late third quarter or early fourth quarter.



This story compiled by Jeff Clabaugh, staff reporter, Washington Business Journal, an affiliate publication, and the New Mexico Business Weekly.