This is an article on Digicel financial situation by Aaron Hayes, the principal of consultancy firm PNG Development Services.
DIGICEL is in trouble.
According to financial reports, the global telco company is currently US$7 billion (K23.59billion) in debt.
While its day to day operations remain profitable in most of the 91 Caribbean, Central American and South Pacific countries where it operates, Digicel is not raking in enough cash to keep up with its dinau (credit) repayments.
For the first time in its corporate history, Digicel is now “looking for money to pay its book-ins” – as we say in PNG.
And the takeover sharks from China, Australia and the USA are circling around it.
Irish billionaire Denis O’Brien launched Digicel in Jamaica in 2001 with a business plan to bring cheap mobile calls to developing countries.
Digicel’s worldwide headquarters is still located in Kingston, Jamaica, today.
Digicel expanded throughout the Caribbean region including Bermuda, Trinidad, Haiti and other small island states then spilled across Central America to Panama and El Salvador and into the South Pacific, finally setting up in Papua New Guinea in 2007.
By that time, PNG mobile phone customers were tired of the exorbitant rates charged by the government-owned bmobile monopoly so Digicel’s lower rates and rapidly expanding network coverage was welcomed with open arms here.
Between 2007 and 2015, Digicel group worldwide grew rapidly in size and profitability, putting US$3 billion dollars (K10.38bil) in profits into O’Brien’s pocket and paying millions more to some of his other companies for engineering services and hiring his private jet.
In those days, Digicel’s biggest selling product was voice calls.
With the erection of transmission towers in remote areas of PNG, and other undeveloped countries that had no fixed-line phone networks, the number of mobile customers grew rapidly as millions of rural villagers began to buy and use mobile phones.
Digicel’s expanding rural network and lower rates enabled it to quickly dominate the PNG communications market, opening up mobile calling for grassroots people who could not previously afford it.
Over the past five years however, aggressive competition and the cost of upgrading its data network has left Digicel struggling to accumulate sufficient cash to pay its debts.
Major challenges have included holding market share with voice calling, meeting the cost of rolling out new technology, and declining customer satisfaction.
Voice call competition
Initial success in the voice call market was later slowed by Digicel’s failure to match product and pricing deals offered by its major competitors: bmobile and Telikom in PNG, Liberty Mobile in the Caribbean countries, and Telefónica, América Móvil and Tigo in Central America.
In PNG, bmobile coaxed thousands of customers away from Digicel by offering unlimited free on-net calls to other bmobile phones, and combos with cheap minutes to landlines and other mobile networks.
Digicel stubbornly declined to match this and Digicel customers today are still paying K1 per minute for calls to landlines and other networks, with no off-net combos or bundles available, and no free on-net call offer.
Digicel may have gambled that its more extensive network coverage in the rural areas would trump the attractions of other carriers and hold its market share.
However bmobile and Telikom have been gradually expanding their networks and have a growing urban customer base who care less about rural coverage anyway.
Indeed if it were not for the Please Call Me and Please Credit Me SMS request functions offered by Digicel that bmobile has curiously failed to introduce, beMobile could possibly have overtaken the voice call market by now.
For users living in remote areas where you can’t buy top-up cards, the ability to text a friend or relative in town and request a call back or a credit transfer is essential.
The strategic planners at bmobile have ignored this at their peril because it appears to be the deciding factor holding back thousands of rural Digicel subscribers from making the switch to bmobile.
One day when Digicel and bmobile executives start speaking to each other, it would also be nice if they could cooperate to offer limited free “Please Call Me” texts between the two networks (eg BM to Digi) which would be a kind community service gesture and a big help in emergency situations.
Costly data upgrades
Another sector of the cell network market evolution that Digicel has had to work hard to keep up with is data transmission.
While Digicel was busy raking in the dough from its voice and SMS services, the development of data technology in lead markets like China was forging ahead, leaving Digicel to play catch-up.
Although Digicel PNG’s current data connectivity appears superior to bmobile’s “world-wide-wait”, most Digicel customers especially in rural areas are still web-browsing and Facebooking on struggling 3G connections, with 4G speeds and stable connections simply not working unless they are practically standing right next to a Digicel tower.
Climbing a tree to search for one bar of network signal to send a text message is still a daily reality for many rural customers.
To maintain its future profitability and market share, the Digicel Group has borrowed over US$7 billion over the past five years to build and upgrade its networks for data and TV channels to compete in the growing internet and digital entertainment markets.
Most of the money has come from loans and the sale of short-term bonds.
A big chunk of this dinau is due to be repaid by next year, but the company is reportedly having difficulty getting the cash together.
Digicel Bermuda has already declared itself bankrupt and the world is now watching to see whether the rest of the Digicel Group will be able to trade its way out of the financial situation or will have to “sell the farm”.
Industry observers in PNG are worried about the possibility of a Chinese buyout because bmobile is already working with Chinese company Huawei.
If Digicel also comes under Chinese ownership, then PNG’s national and commercial security may be compromised with all of the country’s communications networks under the control of one foreign country.
The building of a positive corporate image for Digicel PNG began with its welcome entry into the local mobile market in 2007 and since then has been bolstered by heavy marketing of its brand with sponsorship of sports and support of community services via the Digicel Foundation.
However, in recent years the carrier has taken a battering on social media from a growing number of unhappy consumers.
Many are dissatisfied with Digicel customer service, saying they can’t get through to helplines, that e-mails are not replied, and helpers are not helpful.
Customers interpret such unresponsiveness as arrogance and feel that the company is only after their money and does not care about service.
A large portion of enquiries and complaints to Digicel customer service are related to credit units “missing”, “stolen” or otherwise deducted without explanation from prepaid phone balances.
Most such enquiries turn out to be misunderstandings by subscribers who did not read the terms and conditions properly when taking a unit advance from Digicel, or have mistakenly activated recurring purchases.
There are also instances where subscriber phones have been secretly used by family members without permission and used up the credits.
However, there are also genuine cases of computer system glitches that result in unit purchases not being credited to the subscriber’s account, bundles and other product purchases being overcharged, double charged or not activated on customers’ accounts, and other unexplained deductions.
Customers become frustrated with helpline agents who tend to be sceptical when dealing with such cases, often appearing to assume that the customer is just a dill who has gotten his facts wrong.
Customers also resent Digicel’s failure to reimburse units credited by mistake to inactive SIMs.
We’ve all made that boo-boo of transferring units or gifting a bundle to the wrong number by mistake. But when you realise what you have done and ring the wrong number and find out it’s not an active SIM, you kind of expect Digicel’s computers to also recognise this and automatically reimburse the transaction.
Instead the units are just gobbled up by the red monster and the customer is left out of pocket and annoyed.
Likewise, some customers have complained that the Digicel Rewards scheme is a scam because it doesn’t seem to work.
Customers buying units online with credit cards earn “rewards dollars” which can supposedly be redeemed as bonus credits that can be gifted to any Digicel subscriber.
But credit card customers signed up for the Rewards scheme, this writer included, find that when gifting a bonus to a friend the sender’s Rewards balance is debited but the credits are never received by the recipient.
Redeeming a Rewards bonus only seems to work if one emails a complaint to customer service with a screen shot of the failed process which is then forwarded to the Rewards team (based overseas) who then make a manual credit to the recipient’s phone.
This has been going on for several years now despite customer complaints.
Failure to fix the Rewards programme also seems indicative of a don’t-care attitude to customers that has marred Digicel’s corporate image.
With these three burdens of financial woes, sharp competition and unhappy customers, Denis O’Brien might need to get on his knees in the grass and start looking for a lucky four-leaf shamrock.