Digicel to slash global workforce by 1500

-in bid to ease crippling debt

Irish telecoms company, Digicel will cut over 1500 jobs in a restructuring that will likely have an impact on operations here and across the Caribbean.

According to a report in yesterday’s Irish Times, the restructuring is aimed at overhauling the debt-laden business.

The report said that the Bermuda-based company hired consultants in December to aid it in cutting a €6.2 billion debt, which credit analysts had described as “unsustainable”.

Yesterday, Digicel announced a restructuring that involves cutting 25 per cent of its workforce and signing a new deal with a Chinese group, ZTE.

Denis O’Brien

Digicel’s statement did not say how many people it employed, but the Irish Times said that figures published ahead of an abandoned flotation bid in 2015 showed that it had 6,334 permanent staff and a further 989 on temporary contracts.

Those numbers have not altered significantly since then. It is understood that Digicel’s Head, Denis  O’Brien’s group will focus on its permanent staff when it is actually cutting jobs and that the final tally is likely to be more than 1,500.

According to a statement, Digicel intends taking the first step in reducing its workforce on March 1st when it will open an “enhanced” voluntary redundancy deal.

The report said that the company did not say how much it hopes to save from the move, or any of the other measures that it intends adopting in its restructuring. Owned and founded by O’Brien, the company owes its creditors €6.2 billion, more than six times its earnings, which have been in decline for almost three years.

Its executives want to cut this liability to about 4½ times what Digicel earns, the report said.

Its problems have been worsened by the fact that its sales are in a number of different currencies whose exchange rates have been falling against the dollar, in which most of Digicel’s debts are denominated.

The Irish Times said that last December, Michael Chakardijan, an analyst with US research firm, Creditsights, warned at a conference that Digicel’s debt was so high that it left little room for underperformance. The company responded by saying that it fundamentally disagreed with this.

Around the same time it hired financial consultants McKinsey and Goetzpartners to advise it on reducing its debts and tackling its falling earnings. The redundancies and other measures outlined in yesterday’s announcement stemmed from this.

It has retained ZTE to work on revamping its networks. Digicel began as a mobile operator but has had to transition into broadband, which requires fibre-optic cables, and other telecoms services, to maintain its position in its various markets, the report said.

ZTE is a listed Chinese telecommunications group.

The report said that Digicel has spent $1.65 billion over the last three years building a fibre network and boosting its mobile broadband.

The group also plans to centralise its operations into a number of regional hubs, two for the Caribbean and Central American regions and two for the south Pacific. These will handle the group’s billing, payroll and administration and allow staff on the ground to focus on sales.

O’Brien announced plans to float part of Digicel on the New York Stock Exchange in June 2015 raising €1.7 billion to pay off part of its debt and begin reinvesting in its networks but withdrew this the following October saying that investors were not prepared to pay what the company was worth.

“We’ve seen signs for sometime that revenue and profitability has been under pressure so for bondholders the fact that they are taking action is positive,” said David Holohan, an analyst with Dublin-based securities firm Merrion. “Ultimately, Digicel has to work out how to return to growth in the challenging environment of a strong dollar and where telecoms becomes a commoditized industry”, Bloomberg reported yesterday.

O’Brien founded Digicel in 2001. It celebrated its 10th anniversary in Guyana on February 14th.