‘Digicel will kill us’: senior telecom official

Dionisia Tabureguci
It’s not the type of relationship that has gone down too well with telecom companies in the Pacific region.

Perhaps now the most-talked about, criticised and a little feared in the region’s telecommunication industry, the World Bank’s involvement, albeit indirectly, in the funding of Digicel’s foray into the Pacific appears to be far from rested.

First reported by this publication, concern over this particular relationship has gangrened into a serious concern among a handful of regional telecom companies.

They have called on their umbrella organisation—PITA (Pacific Islands Telecommunications Association)—to approach the World Bank as they believe this has become an issue of ethics.

“We read of the World Bank’s response to our concerns in your publication but the Pacific telcos are not buying their explanation,” said one source.

“It’s a diplomatic way of putting their relationship and involvement in the region’s telecommunication industry which is clearly a conflict of interest.

“We still think they should come across with a bit more transparency and accountability, especially since the loan is being provided at a very low cost.”

Digicel’s push into new and emerging markets, including the Pacific, is being backed by a number of development financiers, among them the International Finance Corporation (IFC) which is the private sector financing arm of the World Bank.  

“The matter was discussed at the PITA (Pacific Islands Telecommunication Association) meeting in Hawaii (in January) and there were a number of unhappy Pacific telecom operators there,” said the telecom official.

“Some are now considering applying to IFC for loans, especially to provide services to rural areas which obviously need investment capital that most companies don’t have.  We’ll see then whether this is a genuine case of concern for development by the World Bank and IFC.”

PITA manager Fred Christopher confirmed to ISLANDS BUSINESS the issue was raised and duly discussed, revealing a number of very concerned members. Many Pacific telecom operators now know and are a little anxious of Digicel’s line of financiers, one of which is IFC.

IFC discloses on its website that it had contributed US$10.8 million to the US$41.6 million Digicel Samoa project and will supply US$40 million towards the estimated US$160 million Digicel PNG project in Papua New Guinea. 

The Digicel/IFC/other development banks combination proved to be disastrous for incumbent telcos in the Caribbean, where Digicel’s operation began in 2003. 

Its now pan-Caribbean GSM mobile telephone network managed to net the Irish-owned cellco over six million customers last year, according to its recent press release and this was on the back of investments exceeding US$1.9 billion. 

Such a support from its funding partners including IFC is likely to continue in other Digicel projects in the Pacific, making Pacific islands telecom companies look poor in comparison despite their historically high local dollar profits. 

Against Digicel’s strategy of linking mass markets with suitable technology, readily available investment capital for its infrastructure as well as favourable commercial arrangements with its suppliers, each Pacific islands telecom faces a double-edged sword in the infamous challenge of access to finance and when they do get it, the relatively higher cost of investment capital, which has contributed to the higher cost of communications in the region and made them subject of constant criticism.

“Digicel is basically doing what any big rich guy will do. They will kill all the rest first then put the price up,” said Lionel Yee, retired CEO of Fiji’s Amalgamated Telecom Holdings and current chairman of its mobile operation Vodafone Fiji. 

He believes Fiji people have no sense of pride in their local companies and this sort of attitude would contribute to the demise of Pacific telecoms when Digicel establishes itself in the region. 

Whether or not national pride will take priority over disposable income for the average Pacific consumer remains to be seen. But there are those who view Digicel’s financing structure as immaterial. The important aspect, they believe, is that competition is here for incumbent Pacific telcos which would be good for them and for telecommunication development in the Pacific countries.

“If Pacific islands telco incumbents can rise to the challenges being put before them by their customers, then they have no reason to fear competition,’ said Mark Flynn, former telecom consultant for Our Telikom (Solomon Telikom), Telecom Vanuatu and FINTEL (Fiji International Telecommunications Ltd.)

“The sad truth is that may be they cannot and if so, why should their customers, who are mainly Pacific islanders, be shackled with them? It is the duty of Pacific islands governments to ensure their customers have access to competitive world class telecommunications, and the time is long overdue to stop talking about it and take action."