Corporate blitzkrieg delivers rich spoils

ANALYSIS:WHEN DENIS O'Brien launched the Digicel mobile phone network in Jamaica in April 2001, he could hardly have dreamed that the business would enjoy the success that it has had to date.

It has become the dominant player in the Caribbean mobile market, wiping the eye of telecoms giant Cable Wireless.

O’Brien has also established a strong foothold in the many and disparate islands of the south Pacific, where doing business is not always straightforward.

Digicel is now a business with annual revenues of more than $2.2 billion and Ebitda that is likely to breach $1 billion in this financial year. It has recorded a compound average growth rate of 40 per cent or more in all of its key metrics over the past decade.

Nearly all of this growth has been organic, with just the odd acquisition used to bolster the business.

Digicel’s strategy over the years has been relatively straightforward. Get in early, build out the network quickly and grab market share with aggressive price promotions and deals. It has been a type of corporate blitzkrieg.

O’Brien has sought to embed the Digicel brand into local areas by supporting various community projects and sponsoring anything that moves. Haiti is a good example of this.

Some might argue that he has raised the white flag in Central America by agreeing to sell his licences in Honduras and El Salvador to wealthy rival Carlos Slim.

And his confident talk before the global financial crash of launching in the United States and a possible IPO came to nothing.

On the flip side, Digicel will bank $355 million from the deal with Slim while also picking up his mobile licence in Jamaica, Digicel’s biggest revenue market.

O’Brien has leveraged Digicel’s success to bolster his own wealth. A number of skilful refinancings of Digicel’s complex corporate structure has allowed him to take a substantial wedge of cash off the table and financed his share buying in Independent News Media in recent years.

With 11.5 million customers in 32 markets, you might think that Digicel is close to peak. There aren’t many territories in the Caribbean left to be conquered. But Colm Delves, Digicel’s chief executive, argues that there are plenty of organic growth opportunities – including 4G and data.

In addition, he sees growth opportunities in key markets like Haiti and Papua New Guinea, where phone penetration is low. In Haiti, the figure is about 40 per cent; in Papua New Guinea it’s 30 per cent.

There are also likely to be licence opportunities in the Bahamas and Belize in the next few years.

Yesterday, Delves talked of “raising the bar” over the next five years, adding that it was “not inconceivable” that Digicel’s Ebitda might rise by 50 per cent over that timeframe.

It’s an ambitious target but, given its success to date, it would be a brave punter who would bet against Digicel delivering the goods.