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Interview: Colm Delves of Digicel

22 September 2010

Privately held Digicel launches broadband in Caribbean’s fast-growing markets

Read more: Digicel Caribbean Ericsson WiMax 3G HSPA Pacific Cable & Wireless AT&T

Digicel, 100% privately owned, now owns 32 networks from the Caribbean to central America to the Pacific. It’s growing fast, launching 3G and WiMax, and is on the look-out for further opportunities, CEO Colm Delves tells Alan Burkitt-Gray 

Colm Delves: Opportunities often arise when you least expect
them. As a privately held company, Digicel can move quickly

Telecoms operators have many challenges but few, fortunately, have experienced tragedies to compare with Digicel’s in January 2010.
The privately held operator, which is the biggest in the Caribbean, lost five staff and 100,000 customers to the earthquake which destroyed Port-au-Prince, the capital of Haiti, and the surrounding area.
"It was a very challenging period for Digicel," says Colm Delves, the CEO of the group, whose interests have expanded from the Caribbean to central America and the Pacific.
The company’s headquarters building was only two years old and had been constructed to earthquake-proof standards. None of the company’s standalone base stations were affected, but "a number of rooftop towers were destroyed" and the company had to bring in cellsites on wheels to ensure service continued.
"We did that in days and we expanded over the next few weeks and months," he says. Reliable mobile phone services were essential to the rescue and reconstruction effort — and also vital in allowing Haitians’ many relatives in the US and elsewhere contact their surviving family members.
"There was a big spike in traffic in the immediate aftermath, especially when the US operators started to offer free calls. Traffic in Haiti moved to a higher plateau."
The earthquake happened late in the afternoon local time so most of Digicel’s staff were at work in their protected building. "I shudder to think what would have happened if it had happened a few hours later or at night," says Delves: staff would have been crushed in their collapsing homes, the fate of 230,000 Haitians that day.
Digicel has been heavily involved in helping the community since the earthquake. "We committed $20 million to the relief effort," says Delves.
Digicel has 11 million customers in 32 markets worldwide, though is not as well known as many other operators of similar size. That’s because it is 100% privately held by Denis O’Brien, an entrepreneur who set up Ireland’s second mobile phone network and sold it to BT five years later.
Ebitda margin
But Digicel does issue bonds so it publishes trading statements. At the end of August it announced quarterly revenue of $518 million, "and our ebitda margin is 44%", says Jamaica-based Delves, who has been with the group since 2004, first as group CFO, then group CEO from June 2005.
Digicel was created at about the time BT bought Esat for $2.5 billion in 2000. "Digicel is just over nine and a half years old," says Delves.
The company set up in Jamaica first of all to take on BT’s old rival, Cable & Wireless, the incumbent in one of the Caribbean’s largest islands. "There was a huge amount of pent-up demand in Jamaica," says Delves. "It ticked all the boxes." Services started in 2001.
From there O’Brien expanded across the Caribbean, "mainly greenfield operations but some acquisitions", says Delves. When he joined the company, Digicel was active in eight markets, but in 2005 it acquired AT&T’s mobile business in the region. "We overlapped in five markets and AT&T was in five markets where we had no presence." The businesses were integrated over a 12-month period.
Since then, Delves has seen a rapid increase in the number of markets the company serves. The biggest investments were in Haiti "where we were the largest foreign direct investor" and Trinidad.
"Since then we’ve moved into central America." O’Brien’s company acquired a small business in El Salvador with 100,000 customers "and we invested heavily and made it highly competitive". The others
Oddly, the El Salvador acquisition was also called Digicel, so the now owner’s entrance to the market could not be strengthened by a rebranding. "We tried a different tactic: we offered customers money back if they could not get coverage."
The strategy was successful. "Now we have more than a million customers and we are number two in the market." Competitors include Millicom, América Móvil and Telefónica. Now, only Millicom is bigger in El Salvador, says Delves.
"In Honduras we went from the third player out of four to number two, overtaking América Móvil," he adds. We launched in Panama in December 2008. "It’s been a huge, continuous expansion over 10 years, using rollouts and acquisitions."
The main Digicel group’s expansion to the Pacific is only a few months old. In April 2010 the group acquired Digicel Pacific, also 100% owned by O’Brien but until then an independent company with a separate board. The group paid for the Pacific company through a $775 million bond.
At the time Digicel Pacific was in six markets in the area and had 1.6 million customers. "It had grown and reached scale and having reached scale it was acquired by the Digicel group," says Delves, who now runs a company that stretches from Jamaica in the Caribbean to central America to Fiji in the south Pacific.
Now the group operates in 32 countries, "some of which are small but some are quite large", he notes. That gives the group a wide diversity: businesses include Digicel Bermuda, where the gross domestic product per person is the fourth highest in the world, as well as Haiti, 197th in the list of countries by wealth.
The diversity also means Digicel can concentrate its back-office activities in key areas. Trinidad is a major hub for many of the operations, while Jamaica covers the east Caribbean. "Haiti is a standalone network", but it also — because of the language — provides services to the group’s operations in French-speaking territories in the West Indies and French Guiana, on the mainland of South America.
"For central America we run customer care in El Salvador. We use our scale and our networks to obtain scale." The system "would not be viable" if every operation were independent.
Scale applies to the network equipment deals too. "By and large we use Ericsson in our greenfield operations," says Delves. "In other networks we inherited Nortel equipment but we have replaced that with Ericsson."
CDMA service for tourists
Technology is mainly standard GSM, and fortunately for Digicel the old AT&T properties were also GSM. "But we have overlaid CDMA on some networks," he adds. "For US tourists."
That means Americans visiting places in Digicel’s footprint such as Jamaica, Bermuda and Aruba can bring their CDMA cellphones — working at home on the Sprint or Verizon networks, for example — and they can make and receive calls.
"We don’t market the service ourselves" to residents in those areas, "but we provide it just for roaming customers. It’s not core to our market but it provides a nice little additional income."
There are 3G services, with HSPA+ just launched in Bermuda. "People in Bermuda have the highest per capita use of BlackBerrys in the world," claims Delves. "Bermudans are huge data users."
And the company is "in the process" of installing HSPA+ in the French West Indies "this year", including French Guiana and Martinique.
"Our focus is on WiMax in other markets," says Delves. In Jamaica "we can provide out-of-the-box coverage to 60% of the country". There’s a clear demand: only 17% of Jamaicans have internet access and only 25% of that 17% have broadband, so most of Digicel’s existing mobile customers in the country are not connected to the net.
Digicel’s first WiMax rollout was in the Cayman Islands, three years ago, targeted at both the residential and corporate markets, and the company launched a corporate WiMax service in Jamaica about the same time, expanding it to the consumer section in August 2010, with prepay options as well as postpay. "It’s a pure plug-and-play service." ZTE is the vendor. "We have found them very good."
International top-up 
At the same time Digicel has been promoting packages aimed at the huge Caribbean diaspora, largely in the UK and the US. "We have an international calling package, but we also allow friends and relatives overseas to top up people’s accounts in the Caribbean. That allows them to bypass agents such as Western Union."
Online top-up was hugely beneficial after the Haiti earthquake, when relatives were desperate to get in touch and much of the residential and commercial infrastructure around Port-au-Prince was destroyed.
"The vast majority of top ups in Haiti were already done electronically. We have been pushing phone-to-phone top ups too." Haiti has — even before the earthquake — a poor road network and traditional methods of distributing vouchers are inefficient.
Digicel has been slow to move into mobile banking — though many of its territories do not need it. "We have started to look at it. There’s a lot of hope about it and we have launched trial financial services in Haiti." Again, the poor transport system creates the right environment: "It can take three days to get to the north coast from Port-au-Prince and inter-city transfers are a godsend. We will be launching the service in the next few months." Digicel is working with the Bank of Nova Scotia, but that is not an exclusive deal: "We plan to work with all the other banks."
Where next? Organic growth is strong. Even the Haiti earthquake, tragic though it was, did not leave Digicel with a net loss of customers as new subscribers signed up.
Data is growing strongly with WiMax and 3G both expected to contribute to growth. "We’re looking for opportunities," says Delves.
Costa Rica has asked for proposals for a new licence and in the Caribbean he is looking for "small, bite-sized opportunities". Not in Africa, though: "We think it’s overvalued."
The company does not need funds for expansion, he says: "We are fully funded. We have more than $500 million in cash reserves. We have no need for equity funding and we have no immediate plans to go public."
He and the team are keeping their eyes open. "Opportunities often arise when you least expect them," he notes. And, because the company is privately held, "we can move quickly". GTB