The Rise and Fall of a Caribbean Communications Kingpin

Earlier this 12 months, it was revealed that Denis O’Brien—the Irish businessman who based worldwide telecom group Digicel in 2001—may lose as much as 90% of the corporate to U.S.-based funding corporations.

These corporations are poised to grab management of the enterprise in trade for writing off as much as $1.8 billion of Digicel’s debt.

The revelation that O’Brien may lose his empire follows a tumultuous interval for Digicel. At the moment we check out the rise and fall of a Caribbean communications kingpin.

The Origin Story

Again in 1991, O’Brien was a part of the Esat Telecom consortium, which was shaped to compete with the Irish incumbent, state-owned telco Telecom Eireann.

In partnership with Telenor—Norway’s state-owned telecom operator—O’Brien’s new firm shaped Esat Digifone, which efficiently bid for Eire’s second GSM cellular license. At the moment, Eire was one of many final EU states to liberalize its cell phone market and the newcomer competed aggressively, making sturdy subscriber beneficial properties.

On November 7, 1997, Esat Telecom Group plc held an preliminary public providing (IPO) and was listed on the Irish Inventory Alternate, the London Inventory Alternate, and NASDAQ.

In 2000, Telenor made a bid for management of the corporate, however O’Brien opted to promote the unit to Britain’s BT as an alternative, reportedly making EUR300 million from the EUR2.4 billion sale.

Utilizing the money from his sale of Esat Telecom, O’Brien received a cellular license in Jamaica and went on to launch the nation’s first GSM community in April 2001, underneath the Digicel model title. He proceeded to reuse his Esat Digifone playbook within the Caribbean, aggressively stealing market share from Cable & Wi-fi Communications (CWC), the incumbent cellular operator in most Caribbean cellular markets.

O’Brien’s foray into the Jamaican cellular market turned out to be the primary of many such strikes in a two-decade push for regional supremacy within the Caribbean.

O’Brien’s foray into the Jamaican cellular market turned out to be the primary of many such strikes in a two-decade push for regional supremacy within the Caribbean.

Caribbean Conquests and Latin American Launches

As per its personal information, Digicel toppled CWC to turn into the Jamaican market chief inside simply 15 months of its industrial launch.

Armed with a profitable blueprint, a wave of growth adopted within the 2000s, with Digicel rising its presence by way of a mixture of greenfield launches and takeover offers that encompassed the Caribbean and Central and South America.

As such, the group now has a presence within the following places: Jamaica, Saint Lucia, Saint Vincent and the Grenadines, Aruba, Grenada, Barbados, Cayman Islands, Curaçao, Dominica, Anguilla, Bermuda, Saint Kitts and Nevis, Antigua and Barbuda, Turks and Caicos, Guadeloupe, Martinique, French Guiana, Trinidad and Tobago, Haiti, Bonaire, British Virgin Islands, Montserrat, El Salvador, Guyana, and Suriname.

Making a Splash within the Pacific

With the group’s Caribbean footprint well-established, O’Brien set about discovering a brand new area the place he may apply his tried-and-trusted method. He believed that the Pacific had the potential to suit the invoice.

Digicel’s first working market within the area was Samoa. The group was granted a mobile license in April 2006 and commenced operations following its acquisition of Telecom Samoa Mobile in September 2006, relaunching it as Digicel Samoa in November 2006.

Digicel was subsequently issued a license in Papua New Guinea in March 2007, occurring to launch in July that 12 months. Subsequent, it acquired the belongings of Shoreline Communications (Tonfon) in Tonga in December 2007, relaunched underneath the Digicel model in Might 2008. Digicel Vanuatu went stay in June 2008 and Digicel Fiji launched in October 2008. Lastly, the corporate activated its community in Nauru in September 2009.

NYSE State of Thoughts

With enterprise seemingly booming and a presence in additional than 30 markets, September 2015 noticed Digicel unveil plans for an IPO on the New York Inventory Alternate (NYSE).

The group supposed to supply 124.2 million “Class A” shares and 193.3 million “Class B” shares at between $13 and $16 per share. Digicel anticipated proceeds of round $1.7 billion—utilizing a mid-point of $14.5 per share—with a plan to make use of round $1.3 billion to repay its present money owed. The rest could be used to finance CAPEX and acquisitions.

Inside a matter of weeks, nevertheless, Digicel cancelled the deliberate IPO, citing market situations. O’Brien famous: “Digicel has determined to not proceed with its deliberate IPO right now. Regardless of important help for the IPO from a high-quality group of traders throughout the advertising and marketing interval, present situations, notably in rising markets, have impacted transaction momentum over current days. Given our progress outlook, an IPO for Digicel was non-compulsory and predicated on attaining truthful worth for the corporate. Latest volatility in fairness markets has seen plenty of IPOs itemizing at a reduction to their signalled value, and this was a much less engaging route for us.”

Bondholders, Chapter, and “Enterprise as Ordinary”

Stormy waters lay forward, nevertheless. Digicel weathered a number of years of rising monetary prices and declining revenues in its key markets, leading to important ranges of debt.

Certainly, in Might 2020, Digicel filed for Chapter 15 recognition in a federal chapter courtroom within the U.S., following an identical submitting earlier than the Bermudan courts a matter of days prior. The filings referred to a non-operating intermediate holding firm, Digicel Group One Restricted (DGL1).

The corporate’s liquidation was a part of a take care of bondholders to scale back the group’s debt pile—by round $1.7 billion—by having 5 classes of bondholders trade their securities for notes of a lesser worth.

Underlining the dimensions of its issues, a regulatory submitting confirmed that Digicel’s debt burden at end-September 2019 was an eye-watering $7.4 billion.

Underlining the dimensions of its issues, a regulatory submitting confirmed that Digicel’s debt burden at end-September 2019 was an eye-watering $7.4 billion, in comparison with annual turnover of $2.3 billion for the twelve months to March 31, 2019.

Digicel careworn that the transfer would haven’t any impression on its day-to-day operations, stating in a press launch it was “enterprise as ordinary.”

Pacific Payday

Beneath strain to generate funds, Digicel started exploring the potential sale of its Pacific-operating unit in December 2020, after receiving unsolicited approaches by plenty of events relating to the belongings.

Whereas China Cell was initially perceived because the front-runner for any such deal, the federal government of Australia harbored nationwide safety considerations over any Chinese language involvement. The Australian authorities was keen to supply monetary help within the type of backed loans or mortgage ensures to various bidders as a way to cease a Chinese language state-owned agency from having access to important infrastructure within the area. 

In July 2021, Australian telco Telstra confirmed that it was holding talks with Digicel relating to a possible deal, including that the Australian authorities provided technical recommendation and “monetary and strategic threat administration help.”

Within the occasion, Digicel and Telstra finalized a deal in October 2021, underneath which Telstra would purchase 100% of Digicel Pacific for a complete buy value of AUD2.1 billion ($1.6 billion). Of that whole, Telstra would contribute AUD270 million in fairness, whereas the Canberra administration would offer a financing bundle price round AUD1.85 billion by Export Finance Australia (EFA). Digicel and Telstra went on to full the transaction in July 2022.

Digicel Debt Deal Dodges Default Deadline

On February 28, 2023—at some point earlier than the corporate was attributable to pay $925 million in excellent bonds—Digicel introduced that it reached an in-principle settlement with a committee of collectors for a debt-for-equity swap that would cut back the group’s consolidated debt by round $1.8 billion.

Beneath the phrases of the settlement, O’Brien—who at present owns 99.9% of Digicel—may see his stake minimize to round 10%.

Beneath the phrases of the settlement, O’Brien—who at present owns 99.9% of Digicel—may see his stake minimize to round 10%.

Nonetheless, if the restructuring deal collapses, or if collectors push for a extra punitive end result, O’Brien’s stake may probably dwindle even additional.

Bloomberg subsequently named Golden Tree Asset Administration, PGIM Mounted Earnings, and Contrarian Capital Administration because the corporations set to take management of Digicel when O’Brien cedes his stake.

Regardless of reviews that the proposed debt restructuring plan was struggling to win over plenty of key collectors, it’s believed that the proposal has now secured in-principle agreements with 75% of the affected bondholders.

When questioned about Denis O’Brien’s future function on the firm, a Digicel spokesperson advised the media: “Mr O’Brien would stay actively concerned within the enterprise as a director and retain an fairness curiosity within the recapitalized enterprise.”

There are few certainties in telecoms, nevertheless, and it appears unlikely that the Irishman would be the one calling the photographs as soon as the mud has settled.

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