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Aug 1, 2021
Denis O’Brien in Downtown, Port-au- Prince in 2010. Getty Share As the Morrison government looks to safeguard the telecoms networks of Australia’s Pacific neighbourhood from falling under Beijing’s influence , it isn’t just potentially taking on the might of the Chinese state-industrial complex, but also one of Ireland’s wiliest and most hard-dealing corporate tycoons. Denis O’Brien, owner of the regionally dominant mobile network operator Digicel Pacific — and potentially a $2 billion seller , maybe to China Mobile or to Telstra with the government’s backing — is a formidable player at the negotiating table. He has decades of deal-making, debt-shuffling, and political wheeling and dealing under his belt, weathering controversy while building, buying and selling businesses in the heavily regulated telecoms and media sectors. A billionaire from a country that produces relatively few of them, in Ireland he’s hard to ignore. He is not only a telecoms mogul, but a former bank director, aircraft-leasing supremo and media proprietor, a philanthropist and humanitarian, and a bigwig in the sports sector. Reputedly genial and generous to his friends but unforgiving of his chosen foes, he divides opinion. But one thing nobody questions is his tenacity and durability. “He’s a massive figure here in Ireland, absolutely huge,” says one Dublin observer, who, like many of his compatriots, was reluctant to be named given O’Brien’s litigious habits. “Even if he has the weaker hand, he’ll play it to the full. And he’ll hold out in negotiations until the very last moment.” Denis O’Brien with Bill Clinton - both had philanthropic interests in common. On the face of it, O’Brien’s hand — in a high-stakes game of geopolitical and commercial poker with Telstra and the government — doesn’t look especially strong. Digicel, which he founded in Jamaica in 2001 with the estimated €300 million ($482 million) in proceeds from selling his earlier venture Esat Telecom to BT Group, is carrying hefty levels of debt. Advertisement Even after a canny debt restructuring in May last year, involving a bankruptcy filing in Bermuda and a $US1.7 billion ($2.3 billion) write-off, the pile of outstanding borrowings still tops $US5.4 billion. He still faces operational challenges and future repayment milestones that could put pressure on him to sell the relatively high-performing Pacific business. But even that 2020 restructuring reveals O’Brien’s skill: with his back to the wall, he won the bondholders round to a deal that left him very much in control. The numbers tell it best. In the KPMG liquidators’ report, Digicel Pacific was valued at $US615 million in a best case scenario. Now there’s talk of selling it for $2 billion to the government and Telstra. The timing of this deal is worth noting as well: the next bond payment is due to expire in 2023. And the sale price would allow O’Brien to buy many of the discounted bonds, potentially allowing him to take back full control of the entire business. It’s a pattern that has marked the 63-year-old’s entire career: he has emerged to fight another day from financial and reputational crises that might have sunk many another entrepreneur. And even his bruising corporate battles in the media sector, where he lost hundreds of millions, seem not to have shaken his resilience. His business style is also marked by another trait, according to those that have worked with him: acute micro-management and attention to detail. Advertisement “It’s tough working for Denis. You get phone calls at 3am in the morning, and he expects you to answer. Funnily enough, you think nothing of it,” says HT&E chief executive Ciaran Davis, who worked for O’Brien at Dublin radio station FM98, and later at APN/HT&E. “His capacity to see solutions no one else can even think of is quite extraordinary.” It’s not just phone calls. O’Brien regularly flies around the world to hold in-person meetings with his globally scattered executives, a gruelling schedule that one source said was partially behind his decision to consider selling Digicel Pacific. Political controversy O’Brien’s business career began with a bang. In 1991 he set up Esat Telecom as a competitor to the state-owned behemoth Telecom Eireann. He then teamed up with Norway’s state operator Telenor to set up Esat Digifone, which in 1996 was the winning bidder in the government contract for Ireland’s second mobile telephony licence. This against-the-odds victory against larger global players was later found to have been somewhat irregular: a 14-year investigation known as the Moriarty Tribunal in 2011 concluded “beyond doubt” that the then communications minister Michael Lowry gave O’Brien “substantive information ... of significant value and assistance to him in securing the licence”. The tribunal said Lowry then went on to curtail cabinet scrutiny of the decision, and afterwards his Fine Gael party received donations from Esat. Justice Michael Moriarty said it was not his job to determine whether the correct call had been made in giving O’Brien the contract, but rather whether Lowry had “influenced or impacted” the decision. Both Lowry and O’Brien strongly rejected the tribunal’s findings, but legal attempts to challenge the conclusions foundered. Instead, as one observer recalls it, O’Brien “put his head down” and ploughed on with business. Advertisement In the interim, he’d listed Esat Telecom group on the Irish Stock Exchange, London Stock Exchange and Nasdaq in 1997, and three years later sold it to British giant BT, reportedly netting close to €300 million. He also founded a profitable aircraft leasing company Aergo Capital in 1999, which traded for 15 years before he sold his 80 per cent stake to US investment firm CarVal. He was appointed a director of the Bank of Ireland the following year, and was named deputy governor in 2005 before quitting a year later. In 2001, he went back into the telecoms business, using the Esat sale proceeds to set up Digicel, initially in Jamaica but quickly extending across the Caribbean, central America and the Pacific. He also began to flex his philanthropic muscles: he chaired the organising committee for the 2003 Special Olympics, and initiated humanitarian and development activities in some of Digicel’s major emerging markets – particularly in Haiti, where he worked with the Clintons. At around this time, though, O’Brien had a few setbacks. He lost a contest to buy the telco Eircom in 2001, and four years later he missed out on buying mobile phone company Meteor. Media feud The winner of both contests was Tony O’Reilly, a rival Irish billionaire and owner of the publishing company Independent News & Media (INM) – and also of the Australian company then known as APN News & Media, which later divested its newspapers to News Corp and became ASX-listed Here There & Everywhere (HT&E). This launched one of the great feuds of Irish corporate history. O’Brien appears to have seen the O’Reilly papers’ coverage of him as having cruelled his chances in the Eircom bid, particularly the reporting that led to the Moriarty Tribunal. It was from this point on that O’Brien began to take advantage of Ireland’s loose libel laws, launching at least four defamation actions against journalists. He didn’t always win, but they still put plenty of journalists on their toes. More significantly, O’Brien began buying INM stock and wound up, an estimated €500 million later, with a 29.9 per cent stake — just below the threshold required for a takeover 1bid. A billionaire associate, Dermot Desmond, took another 15 per cent. Advertisement Some of O’Brien’s close allies, most of whom also had roles at Digicel, joined the board, including chairman Leslie Buckley and Paul Connolly. Connolly is a familiar figure in Australia: he remains a director of HT&E after notching up nine years on the board – despite INM selling out to News Corp in 2018 – and is closely involved in discussions about selling Digicel Pacific. Buckley’s tenure at INM has been under Irish High Court scrutiny for several years, after a falling out between the chairman and his CEO Robert Pitt. In 2017, Pitt turned whistleblower, alleging that Buckley was trying to get INM to buy O’Brien’s Newstalk radio station for several times what it was really worth. He also alleged that Buckley had backed O’Brien’s company Island Capital in its demand for a €1 million fee for helping INM offload shares in APN. Most damagingly, Pitt alleged Buckley in 2014 allowed an O’Brien company called Blaydon to pore through archives of INM staff emails, particularly of journalists involved in covering matters related to O’Brien. Buckley, who quit as INM chairman in 2018, denies the allegations, but in April lost a legal bid to have the High Court’s investigators removed from the case on the grounds of bias. Several of the journalists involved in the alleged hack are suing for compensation for alleged breach of their privacy. Ultimately, Belgian company Mediahuis bought INM in 2019, with O’Brien receiving just €43.5 million for his stock – crystallising a vast loss. “That was personality clash, a clash of the upper-class rugby players, that was personal. He was so passionate, he made the worst investment decision of his life. This is a real Irishman with real passions and drive,” someone who has worked with him says. Trouble was, meanwhile, brewing on another front. O’Brien had been borrowing heavily from Anglo-Irish Bank to fund property purchases and investments. After the global financial crisis of 2008-09, which knocked the stuffing out of the Irish economy, it was one of the financial institutions that had to be nationalised. Advertisement According to reports at the time – contested by O’Brien – he was the bank’s sixth-largest customer with €834 million in loans outstanding. The state-owned entity that rose in the bank’s place, the Irish Bank Resolution Corporation, became his creditor but also a collaborator. In 2012, O’Brien bought Siteserv (now known as Actavo), a utilities engineering company, from IBRC for €45 million – a deal that was later investigated by a special commission. In 2013, he bought IBRC loans worth €300 million owed by petrol station operator Topaz Energy, giving him control over a company in which he had previously been a minority shareholder. He sold Topaz to Canada’s Couche-Tard two years later. There was debt aplenty. But even at this time of immense pressure, he gathered supporters. In fact, former Anglo-Irish Bank CEO Mike Aynsley – who had met O’Brien as he called back his loans – now acts as a Digicel PNG Financial Services director and a director of Prism Services, a mobile banking business. O’Brien shows his generous side Peter O’Connell, co-founder of Amaysim, has known O’Brien since the billionaire founded Digicel in the Carribean, and later served on the Irish not-for-profit Right to Sight board, funded by O’Brien. In 2010, O’Connell was scheduled to pitch to O’Brien in Digicel’s Fijian offices when the Haiti earthquake hit, forcing O’Brien to cancel the meeting to focus on Haiti, a major market for Digicel. In Haiti, Digicel had moved many of its staff into earthquake-safe buildings ahead of the disaster, putting Digicel’s network at the forefront of the Red Cross and International aid services. But O’Connell points out he did more than fix the networks quickly to help co-ordinate the recovery program. “Typical of Denis, he doesn’t just fix that [the telco network]. He then developed a design to turn old containers that the Red Cross and others were receiving aid in and leaving on the island, and Denis then cut them in half for cyclone-proof fully fitted schools,” he says, adding that between 40 to 50 schools were built with finance from O’Brien and his friends and business contacts such as O’Connell. O’Connell says O’Brien’s response shows that while his philanthropic involvement in these regions is good for business, it also goes much further than that. Advertisement “Digicel is among the biggest employers, biggest investors in these region. He’s smart enough to invest in the community, but it’s also his natural bent. It’s not cynical, it’s quite real,” he says. “It takes courage and foresight to do what Denis did through Digicel.” Others point out Digicel’s operations in Nauru, with a population of just 12,500 people, shows the company isn’t just there for commercial opportunity. Digicel debts Digicel was also relatively generous to O’Brien himself: he took a reported €1.7 billion in dividends from the company between 2007 and 2015. Observers suggest these funds may have partly been used to repay debts owed to Anglo-Irish Bank and its successor IBRC – which was liquidated from 2015 in a process overseen by KPMG. That money could have been useful at Digicel, though, which was gradually falling into increasing debt – particularly after pulling out of a public float in New York in 2015, just days before it was due. One problem for Digicel was that its revenue was often in developing-country currencies but its debt servicing costs were in US dollars. Meanwhile, some of the key sources of that revenue, such as international call costs and roaming charges, were at risk from customers’ shift to internet-based telephony. It is still the market leader in 21 of its 23 markets, although many of them are small and the bulk of revenue comes from Jamaica, Papua New Guinea, Haiti and Trinidad & Tobago. Still, the company dominates many of its markets, has high margins and stable cash flows. And it looks as though the foreign-exchange markets, as well as global interest rates, are working in his favour right now. “Digicel is the best business Denis O’Brien has ever built – but how much better might it have been if he hadn’t wasted his time on other things?” says Tom Lyons, founder and CEO of Irish business news website The Currency, who has followed the story for many years and survived a defamation suit. “If O’Brien had focused all of his time on Digicel instead of on loss-making media and fracas back home, maybe he wouldn’t now be deciding to sell a large part of it to the highest bidder.” O’Brien’s debt restructuring last year kept him in full control of the company and the process. A potential debt-for-equity swap for the bondholders – involving $US200 million of bonds which could be converted, if necessary, into a 49 per cent stake – isn’t envisaged until 2023. But he’s not holding all the cards. It’s unclear how interested China Mobile really is in buying the company – nobody has confirmed anything publicly. What’s more, he’s still highly leveraged and could do with the cash. On the other hand, he might have time on his side. Drawing out the sale negotiations will likely improve revenues dented by a fall in roaming charges. And he’s picked a prime geopolitical moment to put Digicel Pacific on the table. “It’s impossible not to shake your head and say, ‘he’s going to do it again, isn’t he?’,” one Irish observer says. “I hope the Australian government has had a good Google.” The biggest stories in business, markets and politics and why they matter. Need to know. Our daily reporting, in your inbox.