Latin Finance - September/October 2009 - 66

Caribbean digicel profile Proceeds were for general corporate purposes, including debt service and acquisitions, and allowed the company to increase its overall liquidity position, Digicel said at the time. Citi, JPMorgan and Credit Suisse managed both transactions. Delves says that “this was an opportune financing for us. We were on a non-deal road show that’s part of our routine updating of the investor base, which we do every six months. Based on the feedback we got, we thought it was a good time to do an opportunistic financing.” Christopher Buck, analyst at Barclays, views this latest bond issue as credit neutral “assuming that the proceeds are used for the company’s September 9 $160 million amortization payment rather than for acquisitions.” Buck says that “overall, we continue to remain cautious on Digicel bonds, as they remain deeply subordinated and the company has relatively high leverage.” He calculates that the issue will result in an increase in leverage, perhaps only temporarily if the proceeds are used to pay the September amortization, to 2.8x from 2.6x through the 2014 and 2012 notes and to 5.0x from 4.8x through the 2015 notes. Delves says Digicel is fully funded and able to meet debt obligations for the 2010 fiscal year. “We do have amortizations of the senior facility for $320 million in the current fiscal year, but we are well positioned to meet our obligations.” He adds that Digicel may pursue more acquisitions, though there are no immediate plans. “In the current environment it is appropriate to have as much liquidity as possible and it puts us in a good position to capitalize on opportunities that may arise, although we have nothing specific now in the pipeline.” British Virgin Islands and French Guyana. Digicel arrived in the British Virgin Islands in November 2008, Suriname in December 2007 and in French Guyana in July 2006. The company is also surveying new markets. “There is talk that the Bahamas is also opening up. I understand there is a process to sell a stake in the [national telecommunications] company, which in turn will lead to liberalization of that market, but we are probably talking about a two-year timeframe,” Delves says. Bahamas Telecommunications Company hired Citi in July to advise on the sale of a 51% stake to a strategic buyer. The seller is apparently looking to raise over $300 million through the deal. Digicel began Central America coverage with El Salvador in 2007. More recently, in late 2008, it expanded to Panama and Honduras, where as of the end of March it had gained 1.1 million subscribers. Now Digicel is looking to Costa Rica. “One opportunity we are interested in is a competitive tender process in Costa Rica,” Delves says. “The government has stated its intent to liberalize the market in early 2010. We are hopeful that licenses will be issued in the early part of 2010. We will certainly get involved. Three licenses will be issued,” he adds. Delves says that he would expect América Móvil, Millicom and perhaps Telefónica to show interest in Costa Rica too. While these are important players in Central America, Delves shows no signs of worry. “We already compete against large operators,” he says. “We have competed with them in El Salvador for two years.” According to Delves, Digicel started with 100,000 customers in El Salvador, making it the fourth largest in the sector. Sun, Sand and Cell Phones Covered for 2010 funds: Delves It now claims a million customers and Digicel began operations in Jamaica, Delves says the company is gaining its first market, in 2001. Before Digicel ground against Millicom. arrived, UK-based Cable and Wireless had a monopoly after The situation is similar in the Caribbean. “In the Caribbean acquiring a 79% stake in state-owned Telecommunications we compete against Orange [in the Virgin Islands] and Trilogy of Jamaica in 1998. According to Jamaica’s Office of Utility [in Haiti]. We also have América Móvil in Jamaica and we have Regulation, in 1999, mobile phone penetration was just 4.6%. “We are diversifying our revenues. Initially we were a Jamaica still grown our subscriber base,” Delves tells LatinFinance. Granovsky cautions that competing against large and story. Now we are in 26 markets in Central America and the Caribbean,” Delves explains. This includes high-income markets experienced players, especially in Central America, may prove to be challenging. “Competing against América Móvil like Bermuda, Cayman Islands and the French West Indies, as and Telefónica is completely different than competing in the well as Haiti, which Digicel views as a scale proposition. Caribbean,” he says. “In Haiti we have gone from 5% penetration to 30% and Nevertheless, he does believe Digicel can grow in Central have more than two million customers,” says Delves, without America. “I don’t know that Digicel will become the dominant disclosing revenue. Digicel claims to have a 65% market share player in Central America, but given the size of the market in Haiti and 75% in Jamaica. Jamaica, Delves says, boasts penetration rates in excess of 90% and wealthier markets such as and its stronger customer profile, there is room to generate the Cayman Islands, Trinidad & Tobago and Bermuda are similar. significant cash flow.” Delves’ strategy is rather simple. “We are never complacent and never arrogant. We have a very flat Nonetheless, the company is eyeing expansion. Delves says structure that allows us to move with a lot more speed than some Digicel sees significant growth opportunities in markets where of the larger entities,” he says. LF the company has entered in recent years such as Suriname, Taking Central America 66 LatinFinance September/October 2009

Latin Finance - September/October 2009

Table of Contents for the Digital Edition of Latin Finance - September/October 2009