Digicel's revenues up 27% to $2.23bn

DENIS O’BRIEN’S mobile phone company Digicel Group Ltd increased its revenues last year by 27 per cent to $2.23 billion.

Digicel posted the same percentage growth in its earnings before interest, tax, depreciation and amortisation (Ebitda), which rose to $954 million in the 12 months to the end of March 2011 from $753 million a year earlier.

Digicel’s subscriber numbers rose by 6 per cent in the period to 11.5 million across 32 markets in the Caribbean, Central America and Pacific islands.

Speaking to The Irish Times yesterday, Digicel chief executive Colm Delves said the company’s net profit rose by $175 million last year. But he would not disclose the net profit figure.

Mr O’Brien, who wholly owns the business, was paid a dividend of $40 million by Digicel last year.

Digicel closed the period with cash reserves of more than $600 million. It has borrowings of about $4.6 billion, according to a recent note from ratings agency Fitch.

Mr Delves said Digicel had made “good progress” during the year. “We’re pretty bullish on where we see the business going forward,” he added.

He expressed his confidence that the proposed asset swap with America Movil, which is controlled by wealthy Mexican businessman Carlos Slim, would be approved by various regulators. Digicel is due to sell its assets in El Salvador and Honduras to America Movil while that company’s Claro mobile business in Jamaica is to transfer to Mr O’Brien’s ownership.

Digicel would also receive $355 million in cash, of which $185 million would be used to repay debt relating to its Honduras business.

“At this stage, we don’t envisage any problems in relation to approvals,” Mr Delves said.

This is in spite of the authorities in El Salvador having rejected the initial application on technical grounds relating to the translation of a document from English to Spanish. “It was a pure technicality that has since been resolved. We don’t see that as being an issue,” Mr Delves said.

Digicel is exiting El Salvador and Honduras, Mr Delves said, because “in El Salvador, we were offered a very good price for the business. If you are offered a good price, it would be foolish not to look at it.”

The Honduras deal was spurred by a desire by both groups to consolidate their operations in key markets. “They [America Movil] looked at Honduras and we looked at Jamaica,” he said.

In Jamaica, the deal would give Digicel a market share of about 80 per cent and has been criticised as being anti-competitive by Cable Wireless, the other big mobile operator there, and by some opposition politicians.

“When we acquire Claro, the net adds from taking over this business will be in the order of 40,000 customers because 90 per cent of America Movil’s customer base are already Digicel customers. This is the two-phone phenomenon,” Mr Delves said.

“There’s a lot of smoke and mirrors going on around this fuelled by Cable Wireless. We are doing it because it enables us to avail of their 3G network, which we will upgrade to 4G. For us, it’s more about spectrum than customers.”

Digicel’s only licence in central America will then be in Panama, where it is the number three player. “Panama is motoring ahead. That business is Ebitda positive and has been for some time. It’s a very sophisticated market and a buoyant economy as well, especially with the second canal being built there,” Mr Delves said.