O'Brien's Digicel may invest $40m in El Salvador

Businessman Denis O’Brien has said his Digicel telecoms group may invest more than $40 million in El Salvador over the next 18 months.

His comments come in the wake of the decision of the regulator there last year to block Digicel’s plan to sell its business in El Salvador to a group owned by Mexican entrepreneur Carlos Slim.

Mr O’Brien told local weekly newspaper Expansion that over the next 18 months his company could spend between $40 million and $50 million in the central American country, with a focus on improving data services and customer service.

He also expressed an interest in moving into the country’s fixed-line business. “We would like to take a slice of the fixed-line market here too, and I think we have a very interesting solution for the corporate market in El Salvador,” he said.

In rejecting Digicel’s planned sale to America Movil, the regulator said a “technical, legal and economic analysis” showed a merger would be likely to have an adverse effect on competition and the welfare of consumers in the fixed and mobile telephony markets.

The analysis also found that, by international standards, fixed and mobile telephony in El Salvador is characterised by excessively high levels of market concentration.

The intended sale to America Movil was part of a three-legged arrangement whereby Digicel would also sell its business in Honduras to America Movil and America Movil would sell its business in Jamaica to Digicel. The Honduran and Jamaican deals received regulatory approval. The total net proceeds for Digicel from the transactions were to have been $355 million.

Operating profit

In a document for a recent $1.5 billion bond offering, Digicel said it generated an operating profit of $18.6 million on revenues of $133.7 million in El Salvador in the year to the end of March 2012.

Digicel is the number two operator in El Salvador behind America Movil.

America Movil is one of the largest telecoms operators in the world with more than 256 million mobile customers, more than 30 million fixed lines, 17 million fixed broadband accesses, and more than 15 million television subscribers. It operates in 18 countries in the Americas.