Strategy and technology in telecoms: Digicel withdraws IPO

Abstract

Taking advantage of the deregulation in telecommunications sector in the Caribbean, Digicel entered the Jamaican market in 2001. Digicel quickly usurped the dominance of the incumbent, Cable and Wireless – in the mobile segment of the market – using a strategy of affordable phones and a user-friendly approach to mass marketing. This strategy was used to enter other small underdeveloped markets in the Caribbean and Central America and thus challenge the incumbent by competing aggressively on price. In 2014, Digicel commenced a strategic change, with an evolution from a pure mobile services company to becoming a communications and entertainment provider. Price competition in its most lucrative segment (mobile) saw revenue plummet; the competition from non-traditional players and the existing competitor C&W strategic acquisition of a leading cable/internet provider forced the change in strategy. Digicel’s founder and chairman, Dennis O’Brien, raised equity by issuing an initial public offering (IPO) on the New York Stock Exchange (NYSE). O'Brien surprised observers when he canceled the IPO days before the shares were to be listed on the NYSE. This created a strategic conundrum for O’Brien, which was exacerbated when it was announced that Liberty Global, had agreed to acquire Cable and Wireless Communications plc (CWC), the C&W parent company, for US$8.2B (The Gleaner: Liberty Global to Acquire CWC in a US$8.2b deal). O'Brien’s expansion strategy was now in jeopardy. The market was evolving rapidly, the IPO that was required to fund the new strategy was aborted, and its main competitor was now awash with cash. Digicel needed to pivot quickly, but how?