Denis O'Brien's Digicel is planning to double its revenues as it scales up its presence in the business solutions sector.
The media and communications group, which is poised to pull the trigger on a $2.3bn IPO in New York within days, told investors that "the addressable opportunity in its markets for business solutions could total revenues of up to $3bn," according to documents seen by the Sunday Independent. Last year, Digicel generated revenues of $2.8bn, with operating profits of $707m.
The business solutions space has proved a very high margin play for Digicel, generating compound annual growth of 45.2pc as 2015 revenues came in at $115m.
Slowing growth in its core pre-paid mobile markets has seen the company transform itself into a cable TV, broadband, business services and communications business. The change in consumer habits has seen an explosion of smartphone usage, which is now growing by 1pc per month.
The expansion of data is expected to surpass the fall-off in voice traffic by the end of the year. Cable and television are also seen as high potential growth opportunities for the company as there are very low penetration rates in Digicel's key markets. Its Diaspora remittance product added $128m to revenues this year and the total incremental opportunity for this service is seen as approaching 10 million people.
The Digicel flotation, which will be the second largest IPO in the US so far this year, will raise around $2.3bn. Around $1.3bn of this will be used to retire expensive debt. It has been estimated that interest cost savings from retiring expensive debt could be significant.
"While Digicel has not yet determined which specific tranches of debt it will repay, it expects a reduction in its annual interest expense in future periods by approximately US$61.5m to US$82m," the documents note.
The company has earmarked $400m for further acquisitions.
Denis O'Brien, who is a major shareholder in INM, publisher of the Sunday Independent, is set to sell about 42.5pc of the company to investors in the IPO. It is not expected that Mr O'Brien will take anything out of the IPO.
"We do not expect that any proceeds will be used to fund dividends to common shareholders," the company said in the submission.
Digicel provides mobile communications services to 13.6 million people in 31 different markets spread from the Caribbean and Latin America to the Pacific.
Sunday Indo Business