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Mobile & Wireless
Digicel Sees Sunny Caribbean Outlook
Mobile Operator Will Expand Further
by Ouida Taaffe
Digicel, the privately-owned Caribbean mobile operator
founded 5 years ago, now has a presence in 20 Caribbean
countries, following its acquisition of Bouygues Telecom
Caraibe this week, and expects to expand further. Gaining
additional presence in the Caribbean, and a launch in Central
America, are both moves of interest, according to the CEO,
Denis O’Brien.
Digicel is not looking to raise money to fund this expansion,
O’Brien says. “We have not plans for an IPO, we are fully-
funded. We raised US$300 m last year through a bond issue
that was thirteen times oversubscribed.” The company’s
revenues in the year to March 2006 were US$600 m (a sum
that excludes revenues from the businesses Digicel now has
in Trinidad, Haiti and Martinique, Guadeloupe and French
Guiana), and it is free cash flow positive.
These sound like attractive numbers and Digicel has drawn
suitors. “We’ve said no,” says O’Brien, without giving
details. “We have a huge amount of growth in front of us.”
Though Caribbean islands such as Haiti, where Digicel has
invested US$130m in a network, do not seem to offer a
particularly compelling economic foundation for a mobile
business, appearances are deceptive, O’Brien says. “When we
launched in Haiti yesterday, every one of our 200 retail
outlets had queues going out the door,” says O’Brien. “There
is a real, big underground economy in Haiti, you can see it in
the retail culture. A lot of money is driven by remittances.”
The demand for Digicel’s service is, O’Brien says, driven
primarily by the poor quality and high prices of its
competitors. “Before we arrived in the Caribbean, Cable &
Wireless was charging people to both receive and send a call
and billing to the nearest minute. We charge for outgoing
calls and to the second,” says O’Brien. The ARPU across
Digicel’s business in the Caribbean is a healthy US$27 a
month – though it does vary widely as some Caribbean
economies, such as that of Cayman, are much wealthier than
others.
As the ARPU level suggests, Digicel does not aim to compete
primarily on price. “We are marginally cheaper,” says
O’Brien. “But our positioning is on the quality side. We always
launch with a better network and maintain that.” Digicel is
considering outsourcing the management of its networks to a
vendor, but has not yet made a final decision.
O’Brien is critical of the approach of the exisiting
players. “There is a lot of bad behaviour,” he says. Rather
than tackling Digicel on the basis of operations, its
competitors will use stalling techniques such as refusing to
interconnect. “They put so much effort into stopping Digicel.
They should put their money into fixing their networks,” says
O’Brien.
At the launch of the service in Haiti, where Comcel – owned by
Western Wireless – decided that it would not interconnect with
Digicel, Digicel offered a new Nokia 1100 to everyone who
would trade in a working Comcel GSM phone. “Comcel lost
tens of thousands of customers yesterday and I would
suggest that they will lose around half of their base pretty
quickly,” says O’Brien.
Before the end of colonial-era monopoly in the Caribbean
(which finally expired in January this year), many people
could not afford to make calls at all - certainly not long-
distance - something that is obviously a constraint in a
market where many people have relatives working
overseas. “We have brought communications to everyone,”
says O’Brien, who expects the current 3.5 per cent mobile
penetration in Haiti to double in the next 2-3 months and
reach 50-60 per cent in three years – a penetration level
currently seen in Jamaica and where Digicel claims to have
around half of the market.
Digicel does not have a fixed-line network but it is competing
with the established operators in broadband provision,
through the launch of a WiMAX network in Cayman. “The
uptake is very good,” says O’Brien without giving
details. “They could use it for VoIP, but I don’t see any
cannibalisation.”
The mobile signal of Digicel’s GSM network is available 30-40
miles off the coast of all the islands on which it operates.
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