Digicel dials into net profit for first time with $41m figure

DENIS O’BRIEN’S Digicel mobile phone operation in the Caribbean entered the black last year for the first time since its launch in 2001.

Digicel Group, which comprises mobile phone operations in 24 markets in the Caribbean and El Salvador, recorded a net profit of $41 million (€29.5 million) in the 12 months to the end of March 2009. This compared with a loss of $74 million in the previous year.

"It's an important landmark for us," Digicel's chief executive Colm Delves told The Irish Timesfrom Jamaica yesterday.

At a pretax level, Digicel posted a surplus of $113 million compared with a loss of $48 million in the previous period.

The mobile phone group achieved earnings before interest, tax, depreciation and amortisation (Ebitda) of $680 million, a 34 per cent year-on-year “uplift”, according to Mr Delves.

Digicel’s revenues rose by 11 per cent to $1.73 billion while its subscriber base was up 9 per cent to 7.1 million. The company’s net debt at the end of March was $2.7 billion.

Digicel said the growth in subscribers was helped by successful rollouts in El Salvador (where it now has about one million customers), Trinidad Tobago and Suriname. It also opened in the British Virgin Islands during the 12-month period.

Digicel’s results show that it now has more than two million subscribers in the impoverished state of Haiti and just shy of that figure in Jamaica, the biggest country in the Caribbean.

Its share in these markets is 65 per cent and 75 per cent respectively.

Mr Delves said its profit performance was achieved on the back of strong sales growth and keeping a keen eye on its cost base. He said customer acquisition costs had declined from 16 per cent of its revenues to 11 per cent.

“It’s quite a big swing,” Mr Delves said.

Earlier this year, Digicel reduced its staffing level by 10 per cent through a voluntary redundancy scheme.

This resulted in 385 staff leaving the company across the region and will yield annual savings of $8 million.

“We are growing at a phenomenal pace so you have to continually look at the cost base,” Mr Delves explained. “It was about right-sizing the business than anything more fundamental than that.”

After the end of Digicel’s financial year on March 31st, the telecoms group raised $350 million through a bond issue, which provided funds to acquire a 38 per cent stake in its sister company, Digicel Holdings (Central America) Ltd, which is also controlled by Mr O’Brien.

Digicel Central America launched in Honduras and Panama in late 2008 and had signed up 1.1 million subscribers in these markets in the first five months of operation.

“We’re very pleased with the take up to date,” Mr Delves said.

“We’ve gone into quite competitive markets but we’re happy with the progress we’ve made.”

Digicel is investing more than $800 million on launching mobile services in Honduras and Panama.

Commenting on trading in the current financial year, Mr Delves said: “It’s going well. I’m happy with how things are looking but it’s going to be a slog for everybody worldwide.

“We do see a lot of opportunities and we do expect to further improve our Ebitda margins.”

He said future growth for the group was likely to be driven by the rollout of services in Central America.

Digicel also has mobile phone operations in the Pacific Islands, which are held by a separate company. In total, the mobile phone group has 9.2 million customers in 31 markets worldwide.

It increased its subscriber base worldwide by 34 per cent last year.