Despite coups, corruption and kidnappings, cell phone maverick Denis O'Brien keeps pouring money into the world's poorest, most violent countries. His bet: Give phones to the masses and they'll fight your enemies for you.
Denis O'Brien professes not to understand why wall Streeters think his telecom business is risky. He says this while sitting in an office in
Is there anyplace as inhospitable to capital as PNG?
He concedes a bit to the worrywarts by noting that his experience in
He sums up his strategy thusly: "Get big fast. [Damn] the cost. Be brave. Go over the cliff. [The competition] doesn't have the balls."
O'Brien doesn't let government obstructionism or corruption deter him. He dots countries with cell towers, sometimes before rulers even grant a license, then slashes the price of mobiles on opening day to get the masses using them fast. It's a bet that poor people who have never had phone service before won't let the politicians take their phones away without a fight. Thus does O'Brien avoid the fate of many Western investors in corrupt, violent countries--being forced to sell out on the cheap. That's what happened to
In an April riot in Port-au-Prince, Haiti the mob not only spared Digicel stores from its burning and looting but even gathered in front of a few of them and cheered. Says a jubilant O'Brien, as he reads an e-mail on the news, "They're calling us the Company of the People."
If riots and coups aren't risk enough, O'Brien is moving into
O'Brien also owns a network of 42 radio stations in eight European countries, a golf resort community in
Digicel is his biggest gamble, though. Total revenue: $2 billion. The
In April O'Brien was in the midst of a five-day, four-country visit (via his Gulfstream G550) to keep tabs on his assets. "Why does no one think about reducing costs in this company?" he fumes. In Western Samoa, where Digicel has captured 32% of the population in 18 months, O'Brien lashes out at staff, flown in from various countries, for sins like buying eight vans instead of six (potential savings, $44,000). Next a staffer reports happily that people in the
Then he hears of plans to invite the king of
O'Brien inherited business smarts from his father and a rebellious streak from his mother. The father, who sold veterinary supplies to horse breeders, is Catholic; the mother, Protestant. Neither family showed up at their wedding. His mother, a human rights activist with a special animus for President Reagan, would badger him to join protest marches.
After university in
He dipped into the cell phone business in 1995 when he won a license in
In any case he loaded Esat up with debt and got 550,000 customers in three years. In January 2001 he sold the company for $2.9 billion to BT Group--$300 million of it going to him and $250 million to his workers (even the janitors had options). After the sale his mother phoned to complain about
Shortly after unloading Esat, O'Brien spotted a 3-inch-square ad in the Financial Times inviting bids for a mobile license in
He paid $48 million for a license and rolled out a battle plan he would use on other invasions: spend lavishly on the network (1,000 towers in Jamaica), build clean stores with cheery staff (a rarity in many developing countries) and lure customers by offering new services like per-second billing and big discounts from the competition (80% less for phones and 50% less for calls).
O'Brien also drew on his inner P.T. Barnum, throwing cell- tower parties with live reggae music and starting an American Idol-type contest called Digicel Rising Stars, in which the best amateur performers are chosen by national vote (using Digicel phones, of course). Only 10% of Jamaicans used cell phones before Digicel arrived. Now 90% (2.4 million people) do. Three-fourths of them are using Digicel phones.
He is expanding across the
In June 2005 O'Brien bought a license in
In May 2006 O'Brien launched anyway with a clever come-on: Customers with phones from rivals could trade them in for a free Digicel one. Hundreds of people lined up outside Digicel stores for three weeks in scorching heat. "Let the people know we give a damn about them," O'Brien lectured staffers. Within days he had struck a deal to slap the Digicel logo on water bottles, then had workers hand them out along the lines while dancers gyrated to live music from flatbed trucks.
In one week Digicel had 120,000 customers, and its rivals agreed to interconnect. O'Brien now has 2 million Haitian customers, 64% of the market.
By the end of 2006 private equity firms were circling Digicel. The company had 4 million customers in 22
O'Brien was soon moving into the Pacific. Digicel staffers flew to
Government officials in
Digicel had a lot to lose. It had erected dozens of towers and poured concrete for dozens more. O'Brien used this to his advantage. He brought members of parliament into Digicel's main office to show them a wall map of PNG with pushpins representing planned cell sites in villages that never had a landline connection. The plan to nationalize Digicel was defeated.
Somare wasn't through. A few months later he decreed that Digicel could not beam microwave transmissions from its towers, potentially rendering them useless. O'Brien's response: He launched his service on the sneak, selling phones for a heavily subsidized $6, one-fifth the state monopoly's price. He gave away a chip that allowed state phones to run on Digicel's network. He also gave away $6 prepaid phone cards--250,000 of them in only ten days.
Within five months Digicel had 350,000 customers, 200,000 more than the state firm, and letters began to pour into newspapers ridiculing the state for threatening a rival. "Childish and pathetic," sniped one letter. An editorial called for competition to shake up the water and electricity monopolies, too. O'Brien contacted friends in foreign embassies to lobby the government to not touch the company. "The EU funds PNG. So do
The threat from the state has now largely faded away. Says auction overseer Abe, "Fishermen and farmers are calling me to say, 'Good for you for standing up to the government.'" Indeed, it's hard to overstate the impact cell phones are having on poor citizens. Fittler Larsen, a impoverished betel nut seller in a PNG squatter settlement of 20,000, is making more money now that he can call wholesalers to check if new shipments have arrived. "I used to spend half a day getting supplies," says the 19-year-old, standing barefoot amid half-naked kids. "Now I can stay here and sell more."
Back in the Caribbean, O'Brien bought a license in