O'Brien stands to make $260m from Digicel deal

MULTIMILLIONAIRE businessman Denis O’Brien looks set to earn $260 million (€207 million) from the sale of a 40 per cent equity stake in the Central American arm of the Digicel mobile phone business to a sister company in the Caribbean.

This emerged yesterday in a note from ratings agency Fitch, which said Mr O’Brien owns Digicel’s Central American business and that 40 per cent of the equity will be bought by Digicel Ltd, which runs the Caribbean operation and is also wholly owned by the Irish businessman.

This payment forms part of a proposed $435 million bond issue by Digicel Ltd. The balance of the funds – $175 million – is to be used for “general corporate purposes” in the Caribbean.

The mobile phone group declined to comment on the details of the bond issue or to comment on the ownership structure of the Central American business.

Fitch, however, said Mr O’Brien owns Digicel’s entities in the Caribbean, Central America and the South Pacific.

It was previously thought that other senior directors and executives of Digicel, including businessman Leslie Buckley, owned a share of the Central American and South Pacific entities.

Fitch also said the bond issue would increase Digicel’s total debt to $3.3 billion.

It said the mobile group had about 7.1 million subscribers at the end of 2008.

For the 12 months to the end of last December, Fitch said Digicel achieved consolidated revenues of $1.7 billion and earnings before interest, tax, depreciation and amortisation of $661 million.

“Fitch expects capital expenditures to decline and stabilise over the next few years, resulting in positive free cash flow, which should be used to pay debt maturities as they amortise,” the agency said.

Separately, Mr O’Brien is believed to have agreed to pay $20 million to $30 million to acquire the monopoly mobile phone operator in the Cook Islands to boost his Digicel operation in the Pacific Rim.

Digicel is buying Telecom Cook Islands, which is reported to make annual profits of $4 million.

The company was 40 per cent-owned by the government with the balance held by Telecom New Zealand.

The deal is believed to have been approved by the island’s cabinet last week. Digicel is expected to begin operations in the Cook Islands within a matter of months.

The acquisition is an unusual move by Mr O’Brien and Digicel, who tend to prefer establishing greenfield operations with development finance.

Its recent expansion into the Pacific Islands region and the fact that the Telecom Cook Islands is a monopoly provider probably swayed him, although the government is expected to open up the market to competition.