Ireland’s Would-Be Carlos Slim Sells Mobiles to Masses
Hiking along the Kokoda Trail in remote eastern Papua New Guinea last summer, Denis O’Brien discovered he didn’t have a mobile phone signal. The sturdily built Irish telecommunications tycoon knew how to fix that. He stormed into the local office of Digicel Group Ltd., the wireless operator he’d founded in 2001, and demanded that extra phone towers be erected along the route.
The new masts will add to a network O’Brien’s company began building in 2006, the same year the United Nations classified the South Pacific nation as one of the world’s least developed, Bloomberg Markets magazine will report in its December issue. It was good timing, albeit in a rough neighborhood.
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“Think of building a network in a country the size of France, with hundreds of islands, no roads and cerebral malaria,” O’Brien says.
As he speaks, he could hardly be farther away from the wilds of Papua New Guinea: He’s dressed in a blue suit, sipping tea in London’s plush Chelsea neighborhood.
“I’ve lost nine colleagues in Papua New Guinea building our network -- from plane crashes, accidents, car crashes,” he says. “It is the toughest of tough places.”
O’Brien’s willingness to tackle locations like Papua New Guinea has enabled Hamilton, Bermuda-based Digicel to acquire 13 million customers across 31 markets in Central America and the Pacific as well as the Caribbean, where it’s the largest wireless provider.
“Their strategy is to go in low and hard, picking out small markets that the big players have tended to avoid,” says Steven Hartley, a London-based analyst at Ovum, a research firm. “They do things efficiently and nimbly and basically rip the carpet out from underneath the incumbents.”
Born in Dublin, O’Brien, 55, who owns 94 percent of Digicel, has based many of his companies in the Irish capital, though their reach is often global.
For instance, he has major stakes in Aergo Capital Ltd., an aircraft-leasing firm and broadcaster Communicorp Group Ltd., which operates 20 radio stations across five countries, including Newstalk and Today FM in Ireland. He’s also the largest shareholder in Independent News & Media Plc, Ireland’s biggest newspaper publisher.
Like many of his companies, O’Brien has one foot in Ireland and another abroad. He has homes in Sliema, Malta, and the Algarve region of Portugal as well as in Dublin.
He moved from Ireland to Portugal in 1999, shortly before receiving a 285 million euro (then $288 million) windfall from selling Esat Telecom Group Plc, the Irish telecommunications company that he built in the 1990s, to London-based BT Group Plc for $2.5 billion in 2000. In moving, he avoided paying Irish taxes on the proceeds, according to A Mobile Fortune: The Life and Times of Denis O’Brien by Irish journalist Siobhan Creaton.
Since 2005, O’Brien has been a resident of Malta, saying it’s easier for him to run Digicel from his base there. Living on the Mediterranean island also allows him to legally lighten his Irish tax burden.
The billionaire denies taxation has ever been a consideration in terms of where he spends his time.
“I pay all my taxes in Ireland -- on my income in Ireland, on my dividends,” he says. “But the money I earn around the world, I pay taxes in each of those countries.”
O’Brien is Ireland’s richest native-born citizen, according to the Bloomberg Billionaires Index, which estimated his fortune at $5.1 billion as of Nov. 11. With Digicel, which was valued at $3.7 billion as of that date, O’Brien is emerging as a Celtic Carlos Slim, the Mexican billionaire who controls America Movil SAB, which provides wireless communications in 18 countries. Worth $66.6 billion, Slim is the world’s second-richest man, according to the index.
Married with four children, O’Brien leads a peripatetic lifestyle, clocking miles on his Gulfstream G650 jet.
Although he regularly attends the four-day-long World Economic Forum in Davos, Switzerland, he hasn’t bothered staying overnight in recent years. In January, he spent 10 hours on the ground at the ski resort for a round of meetings with, among others, Hungarian-American investor George Soros and Indian telecommunications mogul Sunil Bharti Mittal.
While a student at University College Dublin, O’Brien set up a house- and office-painting business before winning a scholarship to study for a Master of Business Administration in 1980 across the Atlantic at Boston College.
Two years later, after a stint with Trinity Bank Ltd., a small Dublin merchant bank, O’Brien went to work for the late legendary Irish billionaire Tony Ryan as his personal assistant at Guinness Peat Aviation, the world’s largest aircraft-leasing company at the time.
The “brilliant” Ryan -- who, in 1985, founded Ryanair Holdings Plc, which would become Europe’s largest budget airline -- was the first Irish businessman to make a global name for himself, O’Brien says.
“Ireland is famous for the arts, music, Seamus Heaney, playwrights,” O’Brien says in his Irish brogue. “We weren’t famous for business.”
With Digicel, O’Brien is emulating his mentor’s success, says Jill Tully, a board member of the London Irish Business Society.
“He’s had worldwide success, though he’s still recognizably Irish,” she says.
Before success came failure. In 1989, O’Brien set up Home Shopping Television Network Ireland Ltd., a satellite shopping channel modeled on a similar U.S. channel begun seven years earlier. O’Brien’s outfit folded after 18 months.
“You need a good failure early on,” O’Brien told Bloomberg News in a telephone interview in March, calling his shopping channel “a whopping one.”
He did better with Communicorp, which he also established in 1989, and Esat Telecom, a fixed-line operator that came two years later. The latter took a 40 percent stake in Esat Digifone, a consortium O’Brien formed with Irish financier Dermot Desmond and Fornebu, Norway-based mobile phone provider Telenor ASA. The group won an Irish cell-phone license in 1995.
O’Brien sold Esat Telecom five years later -- at the top of the market -- as he fought off a hostile takeover bid from Telenor. On the lookout for places to invest his 285 million euro windfall, O’Brien headed to the Caribbean after seeing an advertisement placed by the Jamaican government seeking bids for a mobile license.
License in hand, O’Brien organized a marketing blitz at the network’s April 2001 debut that pulled customers from the incumbent operator, Cable & Wireless Communications Plc.
Digicel plastered street corners in Kingston and Montego Bay with the company’s red logo, heavily subsidized the price of handsets and billed customers by the second rather than by the minute, undercutting the competition. Since 2004, the company has been one of Olympic sprinter Usain Bolt’s sponsors.
“Digicel’s launch in Kingston was one of the biggest I’ve seen of any business venture,” says Mark Wignall, a newspaper columnist at the Jamaica Observer. “He used people who knew how to market to Jamaicans. He understood the Jamaican psyche and played on it to the full.”
It worked. Digicel reached its first-year target of 100,000 customers within 100 days, according to Creaton’s biography. As more and more neighboring nations opened up their mobile phone markets, Digicel island-hopped across the Caribbean Sea, adding customers before expanding into Central America.
O’Brien says the Caribbean experience bolstered Digicel’s bid this year for the first mobile phone licenses in Myanmar, the Southeast Asian nation that’s granting outsiders access to its markets after decades of isolation and military rule.
Even so, in June, after months of jetting to and from Asia and accumulating more than $30 million in bid costs, he learned he’d lost out to Telenor and Qatar’s Ooredoo QSC.
As with the Home Shopping setback, O’Brien says he’s not going to spend time peering into his rearview mirror.
“You’ve got to keep moving,” he says. “I was very surprised we didn’t win, but I heard in the morning at 9 o’clock, and by 4 in the afternoon, I’d moved on. We’re looking at opportunities every day. We just spent two days last week in London going through all the opportunities we have at the moment, and it’s a bloody long list.”
Ethiopia may be on it, Ovum’s Hartley says. Mobile phone penetration in the Horn of Africa nation is less than 25 percent compared with about 60 percent across the rest of the continent in 2012, according to data compiled by the Geneva-based International Telecommunication Union.
“Ethiopia is clearly the most logical market that anyone’s going to be interested in,” Hartley says.
O’Brien himself declined to discuss possible targets, though he says he’s visited the country many times. “I like going to Ethiopia,” he says. “I normally invest in countries I like visiting that aren’t boring.”
Digicel, which posted revenue of $2.8 billion in the year ended in March, is wending its way through an industry dominated by deep-pocketed players, such as Slim’s America Movil and Madrid-based Telefonica SA.
These large competitors, attracted by Digicel’s success in less-developed markets, are beginning to encroach on O’Brien’s existing territories and potential markets, Hartley says. America Movil, for example, entered the Jamaican market in 2007.
“It’s a formidable competitor and also has advantages of scale,” Hartley says.
Even after acquiring America Movil’s Jamaican operations in 2011, Digicel still faces competition from Slim’s company and Telefonica in Panama and El Salvador. O’Brien and Digicel have to be on guard, Hartley says: “Everywhere they turn, there’s a Telefonica or an America Movil, so it can only get tougher for them.”
O’Brien says he can handle the rich competitors.
“People always think that if a company is wealthy, it’s going to kill you,” he says. “We would never have gone to any of our markets if we’d had that attitude.”
As Digicel has expanded, O’Brien has displayed an aptitude for public service and public relations. He says tending to a market and to the people who make up the market go hand in hand.
“You fix their telecommunications requirement, but then you fix something else as well,” he says. “You can’t just leave it to NGOs and charities.”
In 2010, after an earthquake struck Haiti, Digicel’s biggest single market, the company redoubled efforts on a school-building program it already had under way. O’Brien says Digicel Foundation will have built 150 schools by early 2014.
He also helped lead an international recovery effort in the ravaged country, including overseeing the Haiti Action Network set up by former U.S. President Bill Clinton’s Clinton Global Initiative.
“What is striking,” Clinton said of O’Brien in 2012, “is how deeply he has embedded his Haiti work into both his business and personal life.”
In his homeland, O’Brien’s business affairs have sometimes caused controversy. In September, he won a decade-long court battle over a 57 million euro tax demand from Ireland’s revenue authorities from the sale of his shares in Esat Telecom.
In 2011, a tribunal that had been set up by the Irish government 14 years earlier to look into corrupt payments to elected officials said that “payments and other benefits” to former Communications Minister Michael Lowry “were furnished by and on behalf of” O’Brien. As a government minister in 1995, Lowry was instrumental in granting a mobile license to Esat Digifone.
O’Brien, who wasn’t charged with wrongdoing, says the tribunal has no legal status and denies the allegations.
“No witness ever went into the witness box and said I got the license unfairly or that there was any political corruption,” he says. “Simple as that.”
Despite his homes and interests abroad, O’Brien remains faithful to his Irish roots and is optimistic about the economy of his homeland. Ireland’s gross domestic product contracted as much as 3.7 percent during the financial crisis, which battered Irish banks and crushed the real estate market. As of Nov. 11, according to a Bloomberg survey of economists, year-on-year GDP growth was forecast to be 0.4 percent in Ireland, outperforming the rest of the euro zone, where output was expected to fall 0.3 percent.
“I’m a believer in Ireland more than ever,” O’Brien says. “The outlook for our businesses in Ireland is much better.”
If true, that should help O’Brien as he looks after his diverse, globe-spanning portfolio. In describing the task over tea in Chelsea, the billionaire reverts to an analogy that would be more familiar to Irish shepherds.
“It’s like having six or seven sheep going up the side of a mountain in Ireland and trying to keep them all going up it,” he says. “You’ll have one or two sheep trying to duck away. You might have four sheep flying up the mountain. It’s about getting them all up the mountain.”
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