The warning lights started flashing over the weekend in the Carribbean, suggesting all was not well with Denis O'Brien's plan to raise up to $2 billion to float Digicel this Friday.

“Most investors, hedge funds . . . are not participating,” suggested one particualrly well-informed source on Sunday, two days before O’Brien pulled the plug.

“[An unnamed fund] has shown interest but at a much lower valuation – it is not going to get done at the targeted price,” warned the source.

Despite the growing uncertainty behind the scenes, the company’s senior management and advisers kept up appearances. They congregated in New York on Monday and Tuesday in anticipation of a last-minute reprieve.

Ceremony

There was even talk that if the flotation went ahead, there could be a small ceremony on Friday in New York to mark the occasion, such as a bell ringing.

In the background, however, the bells weren’t so much ringing as they were tolling. O’Brien knew the listing to raise up to $2 billion was in serious difficulty. So did a few other people who knew the internal workings of the company well.

“A number of hedge funds [are] surprised that they [moved] forward with a road show in the current market environment,” said one of them, days before the float was pulled. “They are going to pound the deal if it goes ahead.”

The key points worrying the fund managers, who were reluctant to part with the $13-$16 a share sought by O’Brien, included that only a tiny proportion of its revenues currently come from cable and fibre services. More than 90 per cent of its $2.8 billion revenues still derive from the squeezed mobile market.

Investors, therefore, wondered why Digicel was not being priced at a level similar to where its main competitor, Cable & Wireless, was before the latter acquired cable company Columbus Communications.

Various transactions between O’Brien and Digicel, whilst clearly disclosed and minor in the context of Digicel’s overall cost base, were also mentioned.

Investors also fretted over Digicel's heavy reliance on two rather exotic markets, Papua New Guinea and Haiti: "The limited competition won't last forever. It is as good [in these countries] as it is going to get."

On Tuesday morning New York time (the afternoon in Ireland) word started to filter back that the plug might be pulled. The board took the final decision later.

Simple choice

As O’Brien told CNBC yesterday: “I woke up this morning . . . happy we pulled the IPO. Our board made the right decision.”

O’Brien had faced a simple choice: hand over closer to 60 per cent of the company if he wanted to raise the near $2 billion sought, instead of the planned 40 per cent, or swallow his pride and admit defeat for now. He swallowed hard.

O’Brien asserted in his interview that he “didn’t have to” float the company, that it was well-funded, and that it can still fulfil its original plan to pivot the business from mobile services towards cable and high- speed broadband.

Analysts, however, are not so sure. David Holohan, the head of research at Merrion Capital, said Digicel's new-found lack of options for reducing its $6.5 billion debt pile means it will have to slow down its plan to transform the business through acquisitions and network investment.

“I’m surprised they wouldn’t just lower the price to get it IPO’d. If they’d delivered over time, [O’Brien’s] remaining stake would have increased in price.”

O’Brien, who hinted he may try to float it again if the markets calm in the next year, was unrepentant.

“Why sell your front garden at a discount if you know it’s worth a lot [more] money.”