Denis O’Brien’s Digicel has managed to turn a profit and make a difference to the lives of the inhabitants of one of the world’s poorest countries, writes Samantha McCaughren, Business Correspondent in Haiti.

The Caribbean may conjure up images of idyllic beaches and crystal-blue waters, but few holiday-makers reach the shores of Haiti. The country is the poorest in the western hemisphere and has a nasty track record for the kidnapping of foreigners.

Global investors have largely ignored the country. But when you arrive at the sparse airport in the capital of Port-au-Prince, you are greeted by a band playing upbeat Haitian music and wearing Digicel T-shirts. The mobile phone company, owned by telecoms entrepreneur Denis O’Brien, has had an impact on the country that goes far deeper than the carnival tone set by the musical welcoming committee.

The impact of Digicel in Haiti confounded even those in the company. Digicel expected to build up a customer base gradually, but it has reached two million in less than two years. When the shops first opened there were queues every day for several weeks.

This may sound like enthusiastic spin from over-eager publicists, but Digicel is by far the biggest investor in the country. It has put in $260 million and has said it will continue to invest heavily in the market.

The business plan sounds unfeasible. This impoverished country is home to one of the world’s worst slums, and conditions for the vast majority of people are dire. But they have embraced communications, and affordable mobile phones have been the key to Digicel’s success.

‘‘At the moment people are spending $12 to $13 a month, which is pretty good for an economy which has limited capacity. You have to take aten-or-20-year view. People’s standard of living will rise and that will lead to more and more spending power,’’ O’Brien told The Sunday Business Post.

‘‘The interesting point about this is that 50 per cent of people in Africa have a mobile phone today, and people wouldn’t have predicted that seven or eight years ago,” he said. Prior to Digicel’s arrival, mobile phone companies targeted a small, wealthy segment of society, with phones at $250 or more, well out of the price range of most people. Digicel’s prices start from $15, and two million of the nine million population are customers. Digi has become a colloquial word for bringing progress to the overlooked majority in this country.

Trade is done on the street corners of Haiti and it was this cash economy that prompted O’Brien to invest. The company has prided itself in bringing First World standards to this poor nation. A new flagship Digicel store would be impressive if it stood on Grafton Street, never mind the run-down, dusty streets of Port-au-Prince.

O’Brien said that it worked because costs were low in the country, although more investment would be needed by the company. ‘‘By their very nature, if you’ve got a network and you’re adding more and more customers, you have to keep investing in capital expenditure, expanding more networks and towers,” he said.

So could he have done it more cheaply? ‘‘We could have, yes, probably for half the price, but we would only have a third of the customer base we have today. You could creep in and spend maybe $100 million or $125 million, but if you want to go and really take the market, you’ve got to go and build the network, your staff, your infrastructure,” he said. The job is made all the more difficult by the fact that most of the country has no electricity and only dirt roads.

While the Haiti experience was Digicel’s, most dramatic ever launch, the group is already in many parts of the Caribbean and is expanding further.

‘‘We have 23 licences here and we set up another vehicle to make the investments in Central America. We’ve got Honduras, which we just brought at auction before Christmas, and we’re interested in getting into four other markets there, like Nicaragua, Panama, Costa Rica, Belize, Guatemala,” he said.

‘‘We have another company out in the Pacific, where we hope to be in around eight countries by about Christmas,” he added. So that would be 32 countries for Digicel.

‘‘Every country is different; every country has its own challenges. For example, in Honduras there’s a lot of competition and they’re fairly well entrenched,” said O’Brien.

‘‘Central America is a good opportunity. It is a new territory. There are already operators in there, but the prices are very high. In the Pacific, there is only one [mobile phone operator] and penetration is very low, only 5 to 10 per cent. The exception is Fiji, where it is about 40 per cent.”

America Movil, which is owned by billionaire Mexican Carlos Slim Helu, is moving in on the Caribbean and some have suggested competition from him could put a halt to O’Brien’s growth ambitions. But O’Brien brushes this aside. ‘‘I’ve competed with companies which have been hundreds of times bigger. Like RTE with 98FM. Telecom Eireann were no slouches - we started a small company with limited resources, but we got there. Competition is the way of the world,” he said.

Digicel Group is expected to post profits of $440 million in the 12 months to March of this year, more than double the $200 million in the previous period. ‘‘The forecast would be for another very, very strong year. It will be similar growth to what we saw over 2006/2007 to 2007/ 2008. It wouldn’t be doubling, but it will jump another step.”

O’Brien said that giving further information at this stage, ahead of the year end this month, would not be appropriate, due to reporting obligations to bond holders. Some $1.4 billion in new bonds were issued by the company last year in a refinancing arrangement.

O’Brien has used different vehicles to invest in Central America and the Pacific, while the Digicel Group is the business operating in the Caribbean. He said this decision was taken with the company’s bond holders in mind. ‘‘We were trying to get the story straight for our bond holders. If you’re a bond holder you prefer to know what you are financing, so going into a whole slew of new countries is difficult for them to fathom,” he said.

Some believe O’Brien is building up a company with a view to selling it on in the medium-term. ‘‘I’ve only sold one business ever,” he said, dismissing the suggestion and referring to the hard work of the many people involved in Digicel.

O’Brien said his ambitions were limited only by the level of penetration in countries around the world. He will continue to seek opportunities in countries where mobile phone ownership is low.

US-based analysts have speculated whether or not the company can make enough average revenue per customer and whether or not the company can grow based on spending by customers in poor countries, such as Haiti. Its potential for further growth in its key market, Jamaica, is being watched, as this is now becoming a mature market.

‘‘If you go to Bermuda, our average revenue per customer is $120 a month. If you go to St Lucia it’s $30, in Haiti it’s around $13. But the cost of running a business is less, so your margins are the same if not better,” he said.

In relation to Jamaica, he said it was ‘‘on fire’’ at the moment. ‘‘Jamaica will have another big year this year. We’re doing a lot of incentives for people who never had mobile phones before. I had a look at the numbers yesterday and certain analysts just don’t have a clue. It’s a very vibrant market.”

Some view Haiti as the biggest Digicel gamble. O’Brien said the answer to Haiti’s problem would be foreign investment and said he had been ‘‘beating that drum’’ for some time. ‘‘I think there are a lot of opportunities for Irish companies here to buy companies and develop them,” he said.

While Digicel has made an impact in terms of providing communications for the less well-off, the company also has a foundation that has built 20 schools in Haiti over the past year. Some 400,000 children don’t have a school place, so the Digicel-funded schools have a tremendous impact on communities. Last week, O’Brien assessed a number of locations for charitable investment in the current year. He and others believe education will help Haiti to improve its economic lot.

‘‘If you read a World Bank report on Haiti, you wouldn’t get on the plane to come here. That’s why people shouldn’t be turned off by opportunities in places off the beaten track,” he said. ‘‘I’d rather invest here than in Germany or France.”

‘Money on the street’ was the key
Lebanese woman Ghada Gebara, who heads Digicel Haiti, said the country provided an obvious opportunity for the company when its mobile phone market was liberalised after an eight-year duopoly. ‘‘We went in and saw a lot of potential. Not a lot of people saw this potential, even the operators who were here on the ground, as they operated a network of minimum service for a certain elite,” she said. ‘‘These companies believed that the masses would not be interested and we proved the contrary.”

Digicel believed money was changing hands on the streets, if not in the banks. The group’s buying power allowed the Haiti business to buy quality phones and sell them cheaply. It began building a network in 2004 and began selling phones in 2006. Gebara said the company’s policy was to build ‘‘a first-class network for our customers’’.

Among the innovations by Digicel has been to sell phone credit in small amounts and to allow people to buy credit and send it to another customer by phone. People working in cities send phone credit to family members in rural areas, providing a vital communications link that was previously absent.

There are now 3.2 million phone users, two million of whom are Digicel customers. When the company entered that market, mobile phone penetration was 2 to 3 per cent; less than two years later, it is approaching 35 per cent.