Digicel Builds Presence in the Caribbean

Digicel founder and Chairman Dennis O’Brien is continuing to expand aggressively in the Caribbean. Beginning the year with operations in seven Caribbean countries, Digitel has purchased mobile licenses in Haiti and Trinidad & Tobago and more recently acquired all of Cingular Wireless’s Caribbean assets except Puerto Rico. The burgeoning mobile operator now has a presence in 15 countries in the region, and it probably will not stop there. An upcoming spectrum auction in Guyana will almost certainly be pursued by the regional leader, and currently un-liberalized markets, such as Costa Rica and Suriname, will also be watched closely.

By acquiring Cingular Wireless’s Caribbean assets, Digicel is now poised to expand its operations to five new markets—Anguilla, Antigua, Barbuda, Bermuda, Dominica, St. Kitts and Nevis—as well as increase its market share in five others—Barbados, Grenada, St. Lucia, St. Vincent and the Grenadines as well as the Cayman Islands. The deal was reportedly worth US$80m, and will benefit both Cingular and Digicel. For Cingular, the move will help maintain its focus on leading in the US domestic market. For Digicel, the deal moves the operator into a better position to truly be a pan-regional mobile player.

In Haiti mobile penetration stood between 2-4 percent by YE2004, so Digicel feels that there is a tremendous opportunity for growth. As in other markets the operator has entered in the past, Digicel will be the first and—at least initially—only operator to offer GSM to its subscribers. However, it will not be the first to deploy 3G technology to the island. HaiTel recently announced that it will be upgrading its network to CDMA 1x2000 with the help of Nortel. By introducing this new infrastructure HaiTel is aiming to increase its customer base by reaching new subscribers as well as increasing non-voice revenue by offering high-speed Internet access and other perks. This may somewhat mitigate the appeal of Digicel’s own offering once operations are in full swing, although HaiTel is already operating at full capacity and a quick greenfield deployment could give Digicel an edge in the market. Haiti is the poorest country in the Americas which will require novel packages and promotions in the developing country.

Digicel has been interested in entering into the Trinidad and Tobago mobile market for a while, and the company will have a chance to buy its mobile license for US$16m. The situation in the newly-liberalized market, however, does not quite mirror those of other formerly-monopoly-run markets Digicel has entered. TSTT, the incumbent operator in the country, was a monopoly until this mobile auction. However, unlike C&W Jamaica, at the time Digicel entered this market in 2001, TSTT (49% held by C&W) had already adopted and aggressively expanded its GSM network offerings. In fact, it’s ahead of the competition’s entry. TSTT announced an agreement with Nortel to spend an estimated US$50m over the next two years to expand and upgrade its GSM/GPRS wireless network, deploying both core and access equipment, such as base stations and switching. One card that Digicel will not be able to play upon entering is being the first or even sole GSM operator in the country. GSM adoption in Trinidad & Tobago has grown fairly quickly since first being offered in 2003; this may somewhat dampen the hype Digicel receives upon beginning operations in earnest.

Another wild card in determining the success of Digicel’s entry into the Trinidad and Tobago market is the simultaneous entrance of another licensee Laqtel. Digicel has certainly established itself as one of the strongest mobile operators in the Caribbean, but it has never entered into a market without the advantage of being the only operator offering GSM or the only new entrant. In addition, market penetration in Trinidad & Tobago will be healthy at 52 percent by YE2005. However, Digicel clearly has the advantage of experienced marketing campaigns, established relationships with vendors, as well as the know-how to adjust its services to island-specific demographics. 

Though Digicel faces unfamiliar circumstances in Haiti and Trinidad & Tobago, there should be no reason to discount the operator in either market. Digicel has increased its revenues from US$93m in 2001 to US$477m in 2004. All of its businesses are EBITDA-positive. It has a minimum level of bureaucracy in its decision-making process; it targets small countries with pent-up mobile demand and offers competitive rates and innovative services. All of these factors enable Digicel to grow its customer base quicker than other operators. Thus, there is no reason why these trends should not continue for such a strong company.