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Digicel faces wireless war as phone giant enters Caribbean market

Friday January 04 2008

Digicel, Denis O'Brien's Caribbean mobile operation, is facing a wireless war following plans by Latin American phone giant America Movil to ramp up its presence in the region.

Mobile operator Movil is owned by the world's richest man, multi-billionaire Carlos Slim.

It is understood Movil is planning to undertake a massive network expansion plan in Jamaica which will provide the platform for its newly acquired MiPhone to aggressively compete against Digicel & Cable and Wireless, the other main operator in the Caribbean.

According to market sources, the move is a direct response to Digicel's incursion into Central America, which has, for years, been the stomping ground of Mr Slim.

The latest development comes following Movil's acquisition of Jamaica's smallest mobile operator Oceanic Digital, which operated under the MiPhone brand, for about $70m last year.

It is expected that Movil will have over twice as many mobile sites than are currently in operation by April, which will give MiPhone the coverage it needs to take on the other two players.

Digicel has enjoyed the lion's share of the Jamaican mobile market since it snatched control from Cable & Wireless Jamaica early in the decade following liberalisation of the market.

But analysts say that is about to change. According to Jose F Otero, president of Signals Consulting, a consultancy firm that focuses on the area, the pressure on Digicel will be powerful.

"This is very serious for Digicel," he said. "Jamaica is still Digicel's cash cow and the most profitable market in the region for the company.

"America Movil's entrance into the market will negatively impact Digicel's earnings as rates are lowered and retention costs increase for the operator. It's important to consider that, contrary to popular belief, Digicel doesn't offer the lower mobile rates in Jamaica."

Impact

He added that comparing the company's behaviour in previous markets, Movil can be expected to start a price war that will negatively impact the revenues of both Digicel and C&W, to rollout a national GSM/GPRS network and highly subsidise GSM handsets.

He also said the company would not be content with solely providing mobile services and will look to become a convergent player.

In the past, Movil has offered $200/$300 handsets to post-paid subscribers for as low as 40 cents in some markets, he said.

Mr Otero expects Movil to continue its expansion in the Caribbean after acquiring operations in the Dominican Republic, Jamaica and Puerto Rico.

"I consider Bahamas, Haiti and Trinidad and Tobago as attractive markets for America Movil," he added. Digicel already operates in the latter two markets.

In terms of muscle, Mr Otero pointed out that America Movil has over 140 million subscribers worldwide on its networks.

By comparison, Digicel had just under 6 million subscribers in September 2007.