Digicel buys sister company for US$825m
Published:Friday | June 18, 2010 | 12:00 AM
Denis O'Brien has moved to tidy up his mobile holdings, executing in this quarter the acquisition of stand-alone company Digicel Pacific Limited (DPL), which now joins the larger Digicel Group Limited family.
Digicel Group bought the Pacific business for US$825 million, paid for with a US$725-million bond issue completed in March and cash on hand, said group spokeswoman Antonia Graham.
Graham sidestepped queries on just how much cash O'Brien pocketed from the deal, and other questions pertinent to the terms of the acquisition.
The Digicel founder, who launched the business in Jamaica in 2001 and is in the process, eight years later, of developing its headquarters on the Kingston waterfront, had 'majority' ownership in Digicel Pacific; and while Graham also did not comment on the other owners, back in 2007, the International Finance Corporation - a favourite funding source for O'Brien - named "Leslie Buckley, directors and staff" as holding unspecified shares in the Pacific operation.
O'Brien owns 100 per cent of Digicel Group. His net worth was last estimated at US$3.5 billion.
"We believe the acquisition of Digicel Pacific Limited will provide the group with a dynamic growth engine in exciting, under-penetrated markets where the Digicel business model is thriving," said Graham via email to the Financial Gleaner, a comment that was supposed to explain the strategy behind the acquisition.
O'Brien, two years ago, said there were at least nine more markets he intended to penetrate in the Pacific region, some of them volatile countries that are starved of communication infrastructure.
The DPL acquisition was executed after the company's March 31, 2010 financial yearend, and does not form part of the consolidated accounts released this week. The consolidation begins this quarter, from April 1, Graham said.
Digicel Group last year made US$2.2 billion of sales, with the Caribbean region and El Salvador accounting for US$1.75 billion and the Pacific around US$400 million. The two regions grew turnover by 12 per cent, relative to the March 2009 results, and added 15 per cent more subscribers to reach 10.8 million in all 32 markets that now includes Pacific island, Nauru.
The Jamaican market, now Digicel's second-largest behind Haiti, added three per cent to its two-million base, and grew revenues by two per cent.
Business was driven by data, postpaid revenue and Blackberry sales. Blackberry users rose 138 per cent in the Caribbean markets, the telecoms firm said.
"It's been another great year for Digicel," declared group CEO Colm Delves in a company-issued statement.
The company made no mention of the added rivalry in its flagship market, Jamaica, where its share of business is constantly being tested by Claro Jamaica, the No. 3 telecoms firm ultimately owned by the powerful America Movil.
"I would like to thank our fantastic staff for their continued great work, commitment and enthusiasm - they are the bedrock of our success," said Delves.
Digicel also reported growth in operating profit by 4.5 per cent, from US$445 million to US$465 million, pertaining only to the 24 markets in the Caribbean and Central America, Graham said.
The company said it retained 43 cents of every dollar of revenue as operating profit, up from 39 cents in 2009, but was not inclined to speak on its net profit performance which was reported last year at US$41 million.
O'Brien, who favours debt financing for capital expenditure, added leverage of US$1.8 billion in total, raised from international bond markets, inclusive of the funds to finance the DPL purchase.
The rest will finance existing debt and be used for "general corporate purposes," the company said.