On October 16, the Financial Gleaner published a letter written by Digicel Jamaica CEO, Mark Linehan, under the title 'Digicel pushes back' in reference to an analysis published by Signals Telecom Consulting on September 23, 2009 on its Caribbean blog with the title 'Jamaica: America Movil entrance did impact Digicel.'
Mr Linehan's letter states the following: "I am writing to correct suggestions made in the article of a 17 per cent decline in Digicel Jamaica's 2009 revenue to $426 million compared to $516 million in 2008." The letter continues: "I understand that the limited available public information on Digicel makes it hard for external analysts to examine our business; however the figures presented in the article are based on a faulty model using inaccurate assumptions."
Signals Telecom Consulting would like to highlight the fact that Digicel Jamaica's CEO disregarded the fact that the analysis presented a model that was only valid if the stated assumptions were correct.
The purpose
The purpose of the analysis was to show how Digicel's ARPU has declined after the entrance of America Movil in Jamaica, and in order to do that, a flat subscriber base of 1.9 million was used. Following are some of the facts that Signals Telecom Consulting provided to Digicel when the company wrote to us to inquire about the analysis published in The Gleaner and Signals Telecom Consulting Caribbean blog:
The original version of this analysis was published in Signals' Caribbean blog.
Signals Consulting's blogs have a publishing policy that says that, as long as the source is cited, it can be re-published.
The analysis never mentioned that Digicel was losing customers, in fact, it stresses that Claro has not been able to grow its subscriber base.
Following is what was published in the blog version: "More than two years after the announcement, Digicel continues to be the largest mobile operator in Jamaica and AMX's local subsidiary Claro has not been able to rapidly grow its subscriber base."
As a telecom consultancy we're always asking industry players specific data about their operations, then we use assumptions to provide a potential scenario that is valid only if the presented assumptions are valid.
Negative impact
If you look into the blog article you'll see that immediately after the assumptions were made the next sentence started with: 'Under this scenario ... .'
Signals Consulting fully agrees that the entrance of America Movil negatively impacted Cable & Wireless but it also negatively impacted Digicel.
The number of 53,000 subscribers added from October 2009 to June 2009 is lower than the one cited in Jamaica's press about Digicel.
The figure quoted in November 2008 is 1.9 million and for the 2Q09 the number is 'above' the two-million subscriber mark.
That said, for the exercise in the blog it was made clear that no subscriber growth was going to be considered since we were looking to see the amount of revenues originated by the same number of subscribers.
It was stated as follows: "Let's maintain 1.9 million subscribers for both year-end March 2008 and March 2009."
A revenue line from Digicel's financial records doesn't provide me with all the necessary information about your Jamaica operation. Particularly if we're going to be able to compare how America Movil's entrance impacted your cost of goods sold, capital expenditure, etc.
Based on all the previous points, Signals Telecom Consulting highlights the fact that the blog presented a likely scenario that was only valid if the stated assumptions were correct.
In fact, we would like to note the following:
Mr Linehan's letter states "On a constant currency basis - that is, if there had been no depreciation of the Jamaican dollar - Digicel Jamaica's full-year revenues would have been 6.0 per cent higher, demonstrating the continued strong underlying growth of the business."
Double-digit inflation
If we are going to assume that if we only use revenues on Jamaican dollar terms there would have been a 6.0 per cent growth, how does the double-digit inflation exhibited by Jamaica during 2008 (factor into) the underlying growth?
Prior to the entrance of America Movil into Jamaica, Digicel only faced two mobile competitors in limited portions of the island as MiPhone's network did not have nationwide coverage.
The rebranding of MiPhone and the commercial launch of the Claro Jamaica brand was preceded by the deployment of a nationwide GSM/GPRS/3G network by America Movil.
Digicel does not consider competing against two operators with nationwide coverage (Claro and LIME) different from with one with limited coverage (MiPhone) and one with nationwide coverage (LIME)?
When reviewing Digicel's mobile prepaid throughout the Caribbean, Signals noted that Digicel Jamaica decreased its rates after 4Q07.
This contrasts with Digicel operations in other Caribbean markets where the prices did not change or even exhibit a small increase between 4Q07 and 2Q09.
Some of the Digicel markets that followed this trend are Anguilla, Antigua & Barbuda, Barbados, Bermuda, Dominica, St Kitts & Nevis, St Lucia, Trinidad & Tobago and Saint Vincent & the Grenadines.
The facts have been presented, now let readers form their own judgement.
Jose F. Otero is president of Signals Telecom Consulting. Email: info@signalstelecom.com