THE COUNTRY OF Ireland has produced its fair share of
business tycoons over the years, but few can rival the success
of Denis OBrien. The 56-year-old executive struck it rich
in mobile telecommunications in Ireland in the 1990s, then
cashed in and moved abroad, well before the Celtic Tiger became
the first casualty of the European debt crisis.
Today, OBrien is owner and chairman of Digicel
Group, a Kingston, Jamaicabased company that operates
mobile networks in 31 countries in the Caribbean, Central
America and the Pacific. The business has made him a wealthy
man indeed: Digicel paid OBrien a dividend of $650
million on his 94 percent stake in the group earlier this year,
padding a fortune that Forbes estimates at $5.6
billion and making him Irelands richest son (albeit a
resident in tax-friendly Malta).
Emerging-markets countries with poorly developed fixed-line
networks have been eager adopters of mobile communications, and
Digicel has ridden the growth wave from Haiti to Panama to
Papua New Guinea. The group boasts 14 million subscribers, a
number that grew by 8.5 percent in the 12 months ended March
31. Revenue slipped 1 percent though, to $2.75 billion, while
earnings before interest, taxes, depreciation and amortization
edged up by less than 2 percent, to $1.22 billion. OBrien
attributes part of the problem to competition from so-called
over-the-top (OTT) operators, which sell cheap communications
services over the Internet, and he promises to play hardball
Still, he sees plenty of growth ahead. Digicel is boosting
capital expenditures by about 30 percent this year, to roughly
$550 million, to develop 4G mobile services and expand a fiber
network that provides communications services to companies and
governments. Digital and value-added services generated 23
percent of Digicels revenues in the latest year, up from
20 percent a year earlier. We just see opportunity to
make investments in our networks, which will generate more
profitability and more income, the entrepreneur says.
While Digicel occupies the bulk of his attention, OBrien
has other irons in the fire. He has launched a recruiting
business in China and last year acquired Monster.coms operation there, ChinaHR.com.
He is mulling an IPO of the business in the next 12 to 18
months to fuel its continued growth. And through private
holding companies, OBrien owns European radio stations
and a controlling 29.9 percent stake in Independent News &
Media, a leading Irish newspaper publisher.
The last investment hasnt been one of
OBriens finest. He began building a stake in 2006,
when the companys shares were trading at about 2.50
(then $3.03); a debt crisis and a digital revolution later,
they plunged below 3 cents early last year before recovering to
stand at about 16 cents today. Independent journalists hit
OBrien hard in 2011, when an official investigation into
business-government corruption found that he had made payments
of 500,000 to Irelands thencommunications
minister, Michael Lowry, shortly after OBriens Esat
Digifone consortium won the bidding for Irelands second
GSM mobile license in 1995. (He would later sell the company to
the U.K.s BT Group.) OBrien dismissed the
investigation report as the most lengthy and expensive
comic ever produced.
OBrien achieved a measure of payback in 2012, when he
wrested control of INM from Sir Anthony OReilly, a
longtime rival and one-time holder of the title of worlds
greatest Irish businessman. OReilly had outbid
OBrien to acquire Irish telephone company Eircom in 2001.
This time OBrien led a boardroom revolt that ousted
OReillys son Gavin from the CEO seat at INM.
Digicels chairman recently discussed the outlook for
mobile, the merits of private ownership and the need for
philanthropy with Institutional Investor International
Editor Tom Buerkle in New York.
Institutional Investor: You got in the mobile
business almost 20 years ago. Is it the same business
OBrien: Oh, its completely
different. Its a much more complex business to manage,
and I think more and more theres greater opportunity than
we ever foresaw. We are just massing out our footprint in every
one of our markets.
Youve announced a big capex surge. What are
you spending it on?
Were obviously rolling out more and more 4G, expanding
our networks, because theres a ferocious appetite for
data. The second thing were doing is were laying
fiber networks to our major customers and also to our towers.
Were buying up cable businesses. And were looking
at television offerings across all our markets. I think more
and more in the
emerging markets were seeing whats happened in
the developed markets. In a country like Papua New Guinea,
theres a ferocious demand for information. And we see
television as an extension of that. So were putting
together 14 to 30 channels for Papua New Guinea.
Can you continue to maintain margins?
Were doing a lot of bundling. Were doing plans.
Were not doing unlimited plans, which we think is
completely nuts weve seen people fall over doing
them, particularly in the U.S. So were pricing it to go,
and we think over the medium term prices will stabilize.
Does the net neutrality debate here in the U.S.
Absolutely. Basically, the cellular industry has been bought
by the OTT operators. Weve spent billions of dollars on
networks, and then weve allowed these OTT operators to
come in, get on our pipelines and go straight to our customers.
I see a major change, talking to the owners and CEOs and
chairmen of major telephone companies theyre all
pissed off. And I think theres going to be a lot of
change in the next six to 12 months.
How do you regain control of the
Well, if you take Viber, who are trying to aggregate
international phone calls and drop them in on our network for
free, breaching laws in Jamaica and Haiti on termination fees
and taxes, we just cut them off. Or else they have to pay a
termination fee like everybody else. You cant have
somebody giving everybody a free ride with their business model
without paying for the capex and the investment.
Youre in a variety of countries tied together
more by size and level of development than by geography. What
ties the group together?
We look at the world as a market and say, Where are
the opportunities? and we just go for them. We dont
look for the problems.
I think European companies, American companies, have had
this thing of looking at all the problems about a country
instead of looking at the opportunity. And I think thats
where Asian and Indian and African investors have really stolen
the march. And were in their mode rather than the
Caucasian European market.
I was reminded last night by the guy running our Papua New
Guinea business that when we went into Papua New Guinea, we
thought wed get 200,000 mobile users. Today we have 2.4
million, 2.5 million users, and its surging. Were
looking at opening another 300 towers in the region. If a
market is only 50, 60 percent penetrated, the opportunity is to
get to 100.
How big a part of the business is extending cable to
companies, and whats the growth trajectory?
[Information and Communications Technology] is probably
about 5 percent [of revenue]. We think we can get that to 15,
20 percent over the next three years. Its a very good
margin business, and in many cases its better margin than
selling mobile services, so we see that as a really great
opportunity. We just did a deal recently with the government of
Turks and Caicos to do the whole government communications
platform, e-gov. Were going to meet governments and come
up with really first-world solutions.
Does consolidation in the major markets, like the
proposed merger of Sprint Corp. and T-Mobile US, have an
implication for your business?
I think eventually it will because theyll all get word
of what were doing, and theyll just fill up their
saddlebags with cash.
Having two very strong operators and two weakish operators
here in the U.S. is not a great model. The idea of putting
T-Mobile together with Sprint is a pretty good idea. Sprint
have fantastic spectrum. T-Mobile have done pretty good at
postpay in the past three or four quarters. And I think it is a
bit of a no-brainer in terms of that deal. Were going to
see the same in Europe. Theres consolidation in Ireland:
[Hutchison 3G Ireland] have bought O2s business. So I
think more and more the model is going to be three operators.
From a regulatory point of view, prices have never been lower;
thats not the issue. Its how do you provide the
networks and the services people want. On their own, T-Mobile
and Sprint cant really spend the money to be a forceful
competitor of Verizon.