By Thanks to some great investigative journalism from Dionisia of the Islands Business magazine, she brought to light for us the financing relationship between Digicel and the International Finance Corporation (IFC). There are concerns that such an access to finance will kill local telecoms in the Pacific and yes that is a very high probability. There is the equal concern as well as to whether local ICT companies can have access to such financing as well.
Digicel is not a new client to the IFC for loans. In our case for PNG, Digicel will be getting a US$40million loan to use for it’s investment in PNG. As the IFC website states, Digicel PNG is conducting what they call a ‘greenfield project’ which ‘…will introduce competition in a low penetration market, where the incumbent, Telikom PNG, currently exercises a monopoly.’
I imagine that since all this information is on the IFC website for anyone to access it is not such a secret. So I think at this juncture I’d like to say ‘Hello and Welcome to the Brave New World of Global Competition!’ With financing like this available to Digicel are they unfairly advantaged? I think that’s debatable, but for starters it isn’t illegal. Is it unethical?, possibly, maybe from IFC. But this is business in the real world. I ultimately don’t think it would make a difference to the mobile war here whether Digicel is getting US$40 milllion from IFC or from any other commercial source.
If Telikom wants to compete, it’s plain and simple..hire and fire who you have to to get the job done right. There is no more time for bullshit. We all know we have the expertise to compete and if Telikom wants ‘to be there’ for us then roll those sleeves up and lets get our hands dirty. Peter Loko is doing a great job, but the individual departments he heads seem to be doing their own thing, and I’m saying this from personal experience.
Telikom is not short of money, nor is it short of manpower. To be honest whether Telikom knew this or not doesn’t make any difference to their efforts. I see this as a great opportunity for Telikom to challenge themselves and to raise the bar of their service offerings. Sure it may take a while or we may have hiccups but as long as you keep communicating with us by telling is what is happening and what you are doing about it to solve the problem. (Which I must say they have been doing).
On the issue of IFC financing, if we have effectively run companies in PNG and we do not have issues with mismanagement then IFC must allow local Telecoms the same opportunity to that financing. I know it will be a hard task considering how state run enterprises have always suffered from political interference. But therein lies the answer and the challenge.
Telikom, take on the challenge and show us what PNG can do!
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Disclosure: Digicel PNG is a website client of Masalai Communications
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March 25, 2008 at 10:44 pm
dtabureguci
Hey Emmanuel, great post this one! But I think our article failed to properly reflect the main issue of concern among the Pacific telcos, ie: that while Digicel is being partly funded by IFC, the World Bank, which is the IFC’s parent body, is providing advisory services to some Pacific governments in the area of telecom deregulation. It also has available to these governments a soft loan facility if they need it to assist them in the telecom deregulation process. It is interesting to note that Digicel has managed to secure itself licenses in the very countries in which this partnership is present.
Some people have viewed this with skepticism and called it unethical and an act of collusion between the three organisations because they believe this will marginalise Pacific interests even if the Pacific telcos have expertise or play by the rules. The three way partnership between Digicel, World Bank and IFC definitely isn’t illegal. In fact, I personally believe it is smart and considering the high cost of communication Pacific islanders have had to endure, it is very timely, but access or maybe the availability of finance becomes a very big issue especially when you have to beat the kind of marketing that Digicel does. In the Caribbean, Digicel now claims majority of the market share. I wonder what has happened to incumbent telcos there. The same will happen in the Pacific and the incumbents will cry foul because this would be a war that is not going to be fought or won on fair grounds.
But then again, there are those who have suffered for so long in the local high prices and poor services who say: Bring on the competition! Because at the end of the day, we don’t care who is financing who but that we get our products and services and be on par with the rest of the world.
I think many Pacific telcos have now realised the importance of the customer because that is what they talk about now - the importance of customer service and care.
March 26, 2008 at 4:06 am
tipster
dtabureguci, I totally agree with you on your last paragraph. I think the same can be said of nationalism because at the end of the day it is not about ownership, funding etc…people just want service that has quality and is affordable.
Telikom just got a major surprise and never prepared for this but now they’ll have to get out there and play ball.
Obviously, Telikom will have to spend extra money on advertising but I think a large part of their focus should be on the quality of their service. Until they improve the quality of their service their numerous ads won’t get the return they expect.
March 27, 2008 at 10:06 pm
dtabureguci
Yes tipster, I couldn’t agree more. It is interesting to note how the telcos are now trying the nationalism approach.
There is indeed merit in being proud of a company owned by your country and your people but I don’t think this is a trust that can be won overnight.
On the other hand, it might also be useful to us in the Pacific to study the World Bank/Digicel/IFC strategy and how it has won markets in new territories.
If that is going to be the way the developed world will come into our market, then why can’t we in the Pacific do the same for our Pacific owned businesses?
Our development banks should get together and throw themselves behind the establishment and growth of promising entreprises in the Pacific. A very good example would be Masalai Communications!
March 28, 2008 at 4:51 am
Emmanuel
Thanks for the support D. Would be allot of paper work, allot of internal auditing and a sharper focus of what we want to do in the Pacific before we can ask for big money.
But certainly an important point in that we should all study and learn from how the multinationals do it. If they can get funding like that for the Pacific then how can we local companies do the same? How can we learn from the market leaders in the Pacific?
March 29, 2008 at 1:42 pm
Emmanuel
D, speaking of financing I’ve always been encouraged by Venture Capital markets of the US and have always wondered how financing such as that could be available here in the Pacific.
I remember some years back someone mentioning to me about the Kula Fund which invested in PNG companies such as Heli Nuigini and Pacific Green of Fiji.
From what I’ve read on the net they are pretty much a Venture Capital Fund for the Pacific. Might be an opportunity there to ask them what they’re about and if they invest in ICT as well.
The Kula Fund from my understanding derives it’s funding from CDC (http://www.cdcgroup.com) and is managed by Aureos Capital (http://www.aureos.com/) through Pacific Capital Partners (PNG) Ltd.
Here’s a good PDF on the second round of funding named Kula Fund II, http://www.cmmc.com.au/55_58_SP08_regional_view.pdf
March 29, 2008 at 8:43 pm
coconutwireless
Usually, these sorts of relationships should make us very wary. For instance, the recent IMF ’suggestions’ for Fiji to off-shore $1b of FNPF funding.
That policy suggestion would surely have been followed up with a ‘preferred list’ of money management companies who would siphon fees, commissions, and pretty much everything else to bleed as much of that pool of capital as they could.
But in this instance, the IFC, World Bank, and Digicel are working together to open up some of the most monopolized telcom markets in the world–a good thing.
It may sting us because it looks exactly like the kind of underhanded trade deals which keep our countries reliant on foreign companies and imports, but the truth is that the only companies we have are the monopolies that have stifled our progress.
This time, it seems to be working in our favor–so long as Digicel keeps driving competition and innovation.
March 30, 2008 at 10:16 pm
dtabureguci
Hi Emmanuel,
In Digicel’s case, I found this document on the Net which I thought says a lot about the kind of financing support that was thrown behind Digicel.
http://www.connolly-finance.com/%5Cuploadedfiles%5Cpdfs%5CDevelopment%20Bank%20of%20Ireland%2029.4.2005%20FINAL%20draft.pdf
March 30, 2008 at 10:25 pm
dtabureguci
We could do the same in the Pacific. I doesn’t have to be on multimillion dollar ventures but something on a smaller scale and on Pacific proportion.
I have been told our biggest problem next to access to finance is the lack of ideas, innovation.
Maybe that explains why we have so few venture capital firms around.
March 31, 2008 at 8:00 am
coconutwireless
D, you are the hardest working journalist in Fiji. When are they going to wisen up, kick out Rika and his band of illiterates, and put you in charge?
Yes, you are right though. There is no reason we could not have set up a company like Digicel in the Pacific.
Unfortunately, this type of thinking is normal for only a select few in the younger generation.
The people in power in our countries still only feel comfortable when white people tell them what to do.
Ireland was an extremely poor country only 20 years ago… the sick man of Europe. They have pulled themselves to such great heights by focusing on technology and innovation.
If anything, the example of Digicel should be an example to us on how we need to establish centers of innovation and entrepreneurial excellence.
If we do not accomplish this, then the best we will ever be able to hope for is to have Australia accept a few hundred of our people at a time to work as fruit pickers
April 2, 2008 at 2:25 pm
Emmanuel
D & CW, great discussion here. In terms of finance on a smaller scale the PNG Microfinance company in PNG has been growing at a very encouraging rate. They would be the first obvious ways of providing access to finance. Maybe at the lowest level that could be a start with microfinance.
But it’s really big business that makes the most impact and if local companies don’t get into it then obviously in a global market we can be sure of outside money coming in. Which in some cases is not such a bad idea in terms of transfer of technology, ideas, expertise etc.
As for ideas and innovation, well we can just start by recognising the people around us. Maybe with annual business prizes.
But even before we talk about innovation and entrepreneurial excellence, we need to talk about plain and simple business management training. All these businesses be they K10 in turnover or K100,000.00 need good managers to take it to the next level.