Fitch gives nod to Digicel’s diversification strategy
Fitch gives Digicel 'stable outlook'rating
International rating agency Fitch has acknowledged that Digicel’s leading market positions and diversification strategy makes the Group a steady performer, thus earning it a ‘B’ rating and stable outlook.
In its assessment of the telecoms and media company, Fitch wrote : “ Digicel has generated stable operating results on a local-currency basis in the first 9 months of fiscal 2016, ended on March 31, 2016. Fitch expects this trend to continue over the medium term. During the period, the company’s constant-currency-based service revenue posted stable growth of 4% underpinned by increasing data revenue supporting Average Revenue Per User (ARPU), and strong growth in ‘Other Markets’ and non-mobile segments.
“Its high EBITDA margin, measured by EBITDA to total revenues, remained stable at 41.8% which compares to 41.4% a year ago, backed by cost control efforts.”
Digicel continues to make progress with its subscriber base climbing to 14 million as of December 2015 from 13.8 million a year ago.
Digicel, headquartered in Jamaica, has pursued a diversification strategy which is already showing signs of paying off.
In its assessment of the telecoms and media company, Fitch wrote : “ Digicel has generated stable operating results on a local-currency basis in the first 9 months of fiscal 2016, ended on March 31, 2016. Fitch expects this trend to continue over the medium term. During the period, the company’s constant-currency-based service revenue posted stable growth of 4% underpinned by increasing data revenue supporting Average Revenue Per User (ARPU), and strong growth in ‘Other Markets’ and non-mobile segments.
“Its high EBITDA margin, measured by EBITDA to total revenues, remained stable at 41.8% which compares to 41.4% a year ago, backed by cost control efforts.”
Digicel continues to make progress with its subscriber base climbing to 14 million as of December 2015 from 13.8 million a year ago.
Digicel, headquartered in Jamaica, has pursued a diversification strategy which is already showing signs of paying off.
Commenting on Digicel’s diversification into other business arms, Fitch concluded:
“Ongoing revenue diversification away from traditional mobile voice is positive as the revenue proportion of mobile voice fell to 56% during the first 9 months of fiscal year 2016 from 64% a year ago. The contribution from mobile data should continue to steadily increase over the medium term, mitigating negative pressures on the voice ARPU.
“During the first 9 months of fiscal year 2016, data revenues grew by 14% from a year ago on a local currency basis, accounting for 35% of mobile service revenues, driven by a steady increase in smartphone penetration to 41% from 31% a year ago.”
Turning its attention to Digicel’s broadband and cable offerings Fitch further added, “Digicel’s recent strategic focus on cable and broadband should enable further revenue diversification as it continues to connect more homes on its established networks.
“The company’s total cable RGUs have increased by 127% during the period to 152,000 from 67,000 with the segmented revenues increasing by 200% to US$57 million from US$19 million.
So what does the future hold for fast-growing Digicel which has made a foray into other sectors?
“ Despite marginal EBITDA contribution in the short medium term, cable and broadband should be a meaningful cash generator in the long term along with business solutions and diaspora segments of which revenues grew by 25%
and 16% during the first 9 months of fiscal year 2016 compared to a year ago,” concluded the rating agency, Fitch.
“Ongoing revenue diversification away from traditional mobile voice is positive as the revenue proportion of mobile voice fell to 56% during the first 9 months of fiscal year 2016 from 64% a year ago. The contribution from mobile data should continue to steadily increase over the medium term, mitigating negative pressures on the voice ARPU.
“During the first 9 months of fiscal year 2016, data revenues grew by 14% from a year ago on a local currency basis, accounting for 35% of mobile service revenues, driven by a steady increase in smartphone penetration to 41% from 31% a year ago.”
Turning its attention to Digicel’s broadband and cable offerings Fitch further added, “Digicel’s recent strategic focus on cable and broadband should enable further revenue diversification as it continues to connect more homes on its established networks.
“The company’s total cable RGUs have increased by 127% during the period to 152,000 from 67,000 with the segmented revenues increasing by 200% to US$57 million from US$19 million.
So what does the future hold for fast-growing Digicel which has made a foray into other sectors?
“ Despite marginal EBITDA contribution in the short medium term, cable and broadband should be a meaningful cash generator in the long term along with business solutions and diaspora segments of which revenues grew by 25%
and 16% during the first 9 months of fiscal year 2016 compared to a year ago,” concluded the rating agency, Fitch.
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