Last weekend, the UN Broadband Commission for Digital Development met in Dublin at the invitation of Denis O'Brien. His mobile phone company Digicel is a financial backer of the commission and O'Brien was a founding member.
“The long-sought panacea to human poverty may at last be within our reach in the form of broadband networks that empower all countries to take their place in the global economy, overcoming traditional barriers like geography, language and resource constraints,” the Digicel chairman told the two-day conference.
O’Brien accepted that broadband alone would not be sufficient to address the problems besetting the developing world but he said that it could be used a “catalyst” to bring about improved access to healthcare, education and improved inward investment and job creation.
“We believe that access to broadband is a basic human right,” O’Brien said.
This might be stretching things somewhat. Food, water and education for sure but mobile broadband and smartphones?
O’Brien knows a thing or two about bringing technology to the masses in developing countries through Digicel’s activities in 30 markets in the Caribbean, central America and the Pacific islands.
Haiti is recognised as the poorest country in the western hemisphere. It also happens to be Digicel's biggest market by revenues, having launched there in 2006.
The penetration of wireless communications has risen in Haiti from 5 per cent in 2005 to 59.4 per cent in 2012, according to the 300-page document produced to support Digicel’s latest bond offering.
This was largely on the back of Digicel’s substantial investment in the country. It’s a significant advancement that has no doubt brought certain benefits to the country.
Yet Haiti remains in dire poverty with its GDP per capita a paltry $799. More than half the population is considered illiterate, many don’t have access to clean running water, infant mortality is high by western standards, and parts of the country are inaccessible by road.
The earthquake in 2010 exacerbated the situation. Digicel’s bond document notes that Haiti’s “long-term recovery is dependent on foreign aid, which may not be sufficient to address the country’s needs”.
The country also relies heavily on remittances from expats in the United States and elsewhere, a process admittedly made easier in recent years by Digicel's technologies.
Digicel has 4.3 million subscribers (roughly one-third of its total customer base) in Haiti and made an operating profit of $102 million on revenues of $528 million last year. Its subscribers pay it about $120 each per annum to use its services. That’s quite a sum of money given the poverty in the country and meagre average earnings.
In 15 of Digicel’s 30 markets in the Caribbean, central America and Asia-Pacific, the GDP per capita is less than $8,000 annually. This hasn’t held the company back. It generated operating profits of $754 million from revenues of $2.8 billion last year - a healthy margin of 27 per cent.
And Digicel has turned into quite a cash cow for O’Brien and other shareholders, directors and senior officers.
It paid a dividend of $650 million last month to shareholders. This is almost entirely to O’Brien, who owns 94 per cent of Digicel on a fully diluted basis. This was in addition to $346.7 million in the year to the end of March 2013, $115.8 million in the previous 12 months, and €45.3 million a year earlier. That’s $1.16 billion in less than four years.
The bond document also estimates that share option payments to senior executive at Digicel could total $60 million over the next two years.
The company has made these payments in spite of being saddled with debts of around $6 billion.
Digicel isn't the only telecoms business in the developing world paying a hefty divvy to its shareholders. Latest quarterly accounts for America Movil, the telco controlled by Mexican billionaire Carlos Slim, indicate that it paid 15.88 billion pesos (the equivalent of $1.2 billion) in dividends to shareholders last year. Slim is another backer of the broadband commission.
Cynics would argue that multinational telecoms companies such as Digicel and America Movil champion mobile broadband and the latest wireless technologies in developing countries because its suits their corporate interests.
Both carry substantial debt burdens and need to grow their revenues and keep the cash rolling in each year to keep their investors or debt holders happy. One way to do this is to migrate more and more customers to smartphones and up-sell them various data services.
Digicel’s smartphone penetration increased to 20 per cent at the end of December 2013 from 13 per cent a year earlier so there’s plenty of headroom to go.
O’Brien and Slim have demonstrated that there is a dividend from the rollout of mobile technologies in developing economies. To date, it appears to have been more corporate than social.
