(Reuters) - Cellular operator Digicel Group Ltd jumped into Myanmar
early and big, hiring staff, funding local sports, negotiating land
deals for thousands of cell tower sites and signing up hundreds of
partners for retail outlets.
The strategy helped propel it
onto the shortlist for a mobile license in one of the world's last
mobile frontiers, putting an operator that ranks 65th globally in terms
of customers up against giants such as Vodafone Group Plc.
Whether
its strategy pays off or not, industry insiders say, Digicel, largely
unknown outside the Caribbean and some Pacific islands, has shaken up a
usually conservative industry.
"They
have been a disruptive force," said Roger Barlow, a Hong Kong-based
telecommunications consultant who has worked in Asia for more than 25
years. "Some of the big guys tend to look down their noses at them but
they shouldn't because they're becoming a credible player."
Myanmar
this month short-listed 12 consortia for two licenses it plans to grant
foreign operators in late June. The government wants to expand mobile
penetration from less than 4 percent to up to 80 percent by 2015-16.
While Digicel is up against behemoths such as Vodafone, China Mobile Ltd and Telenor ASA, several other big players failed to make the list - among them South Korea's SK Telecom Co Ltd and Egypt's Orascom Telecom Holding SAE.
It's a vindication of sorts for Digicel's long-term approach. Business
development director Frank O'Carroll led the charge into Myanmar in
2009. In early 2012 he persuaded the company to commit funds to build a
local brand and prepare the ground so that if it did get the go-ahead it
could roll out a service in a matter of months.
That
entailed deploying hundreds of workers across the country to negotiate
thousands of leases for base station sites, months before the government
had even begun the tender process.
"There's not one square inch of the country we haven't been in," O'Carroll said in an interview in Singapore.
Its
sponsorship of the national football federation has built brand
awareness - of sorts. Lots of locals have heard of Digicel, O'Carroll
said, though at least initially they were as likely to think it's a
brand of battery as a cellphone operator.
It's a strategy, he said, that Digicel has been pursuing in much smaller markets for more than a decade.
"What
we are doing in Myanmar is not unique to Myanmar," said O'Carroll. "The
first country that Digicel as a company looked to get a license was
Trinidad and Tobago. We did very the same thing. We were there, we
leased the land, we rented local offices, we started a local team,
sponsored big sports."
SMALL AND NIMBLE
Digicel has since set up shop in 31 markets,
gaining 13 million customers. While none boasts a population above 10
million people, the company has taken on some major rivals, including America Movil SAB, Vodafone, Telefonica and Cable & Wireless.
"I
don't think there's any fantastic science to it, but I do think it's
our ability to move fast because we're small, we don't have this complex
machinery that takes months and months to make decisions," said Vanessa
Slowey, Singapore-based CEO of Digicel Asia Pacific, in an interview.
Making
those decisions is Digicel owner Denis O'Brien, an Irish billionaire
who first focused on small markets in the Caribbean after noticing that
spectrum was being auctioned off in Jamaica. Eventually the Pacific
beckoned.
Telecoms executive David
Borrill recalls meeting O'Brien in his office after three years working
for the incumbent operator in Samoa. "He went straight over to his
library and opened the biggest atlas he had, turned to the Pacific and
said, 'Tell me about this, where would you put an office here?'"
A
few weeks later Borrill was back in Samoa, this time working for
Digicel. The company bought out Telecom New Zealand's stake in the
incumbent operator in 2006, and within six months had more than doubled
its customer base.
Last financial
year the company reported revenue of $2.5 billion, year-on-year growth
of 14 percent and EBITDA of $1.08 billion, up 13 percent. It has 87
percent market share in Haiti, at least 75 percent in Jamaica and 92
percent of Papua New Guinea, according to Bank of America Merrill Lynch.
"Digicel is very astute in selecting the markets it enters," said John Hibbard, an Australia-based telecoms consultant. "It has to be convinced it will win a reasonable market share."
When
it isn't, it's prepared to abort. In East Timor, for example, Digicel
went so far as building cell towers, and assured the government that if
granted a license it could cover more than 90 percent of the population
within four months.
But, Digicel
said, the government dragged its feet and ignored advice to issue only
one license. So when it did eventually win one of the two on offer last
year, Digicel turned it down. "Why would we invest $50 million to
compete with two other operators, for the 40 percent that is left? It's
crazy. So we handed our license back," said O'Carroll.
Digicel
sold its assets to the other licensee Telin, a unit of Indonesia's PT
Telkom. The company broke even on its Timor investment, said Digicel's
Slowey, without giving details.
Such
an approach is at odds with the industry's more conservative approach,
where investment decisions must be highly rational and based on certain
outcomes.
"Digicel doesn't have the
institutional memory of other telcos," said Rob Bratby, a
Singapore-based telecoms lawyer with Olswang LLP. "It's an example of a
company with a different mental framework."
SOROS PARTNERSHIP
Digicel,
however, has not had a free ride in Myanmar. The government turned down
its proposal in 2012 to set up a joint venture with the incumbent
operator, Myanmar Posts and Telecommunications, in favor of an open
tender.
That has meant facing the
diplomatic and financial muscle of some of the world's biggest and
best-connected operators, prompting Digicel to take on its own partners:
Yoma Strategic Holdings, owned by Serge Pun, a powerful businessman
who, unlike many tycoons in Myanmar, isn't entangled in Western
sanctions. The other member of the consortium: Quantum Strategic
Partners, owned by financier George Soros.
The
Soros-funded Open Society Foundations have long worked with exiles,
refugees and dissidents, according to its website. Last year Soros said
he would set up an office in Yangon.
Digicel
shrugs off criticism that it lacks the experience of working in big
markets like Myanmar, arguing that it's harder to work in lots of
countries, whatever their size. Among the shortlistees, only France Telecom SA matches Digicel in the number of markets covered.
"Whether
it's the smallest country in the world you deploy in or the largest,
it's still the same building blocks, still the same issues that you must
go through," said O'Carroll. "A lot of those same things, whether it's
Nauru's 9,000 people or Myanmar's 60 million, we think are going to be
identical."
source: Reuters
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