CARICOM competition body studying proposed CWC mega deal

The CARICOM Competition Commission yesterday said it is studying the proposed US$3B acquisition by Cable & Wireless of regional cable provider Columbus International which has sparked regulatory concerns across the Caribbean.

In a statement, the Suriname-headquartered body said that as part of its monitoring of business activity in the Caricom Single Market and Economy (CSME) it took note of the announced transaction on 6th November 2014 by Cable and Wireless Communications (CWC) and Columbus International Inc. (‘Columbus) and began an internal preliminary assessment of the transaction based on available public information.

The Commission said it will make a further announcement at the conclusion of its internal review process on its strategy and plans for addressing the announced transaction.

The release noted that the Commission’s role is to implement Article 169 on Community Competition Policy namely: (a) the promotion and maintenance of competition and enhancement of economic efficiency; (b) prohibition of anti-competitive conduct; (c) and the promotion of consumer welfare and protection of consumer interests.

The release added that the Commission is a “strong advocate for efficiency in the working of national and regional markets in the CSME with the benefits to be shared among all stakeholders in an equitable manner.”

The Commission admonished that it is crucial that the Governments of Member States and regulators ensure the “principles of competition are considered in the review process for making a determination on this transaction. It is vital that the impact on competition of the proposed transaction be considered in a thorough manner, and that any determination made is designed with competition enhancing outcomes in mind.”

According to a report in the Trinidad Guardian, concerns have been expressed that the deal could lead to a decline in telecommunications competition across the region and anti-competitive behaviour in T&T.

Officials of CWC and Columbus at the signing (Trinidad Guardian photo)
Officials of CWC and Columbus at the signing (Trinidad Guardian photo)

The proposed transaction will bring together CWC, which has 5.7 million mobile, fixed line and Internet customers in Panama, the Caribbean and Seychelles, with the 700,000 residential of Columbus in the Caribbean, Central America and the Andean region. In T&T, the Guardian report said that the acquisition will mean CWC, which owns 49 per cent of majority state-owned TSTT, acquiring FLOW’s cable TV, Internet and telephone services. The CWC announcement said the completion of the transaction was conditional on it receiving regulatory approval in Barbados, Jamaica and T&T.

Telecommunications Authority of T&T (TATT) CEO Cris Seecharan, noted that the local regulator was required to approve any change of ownership in licensed entities.

Seecharan, according to the Guardian, said from a regional perspective, the acquisition of FLOW by CWC would reduce the number of players from three — FLOW, Digicel and the CWC-owned LIME — to two, Digicel and LIME. Seecharan said: “The region would be going from a position of vibrant competition among three players to the creation of an effective duopoly, which sometimes leads to a stagnation in competition that could impact on the affordability of service. “In T&T, the issue is more about the potential for anti-competitive behaviour as a result of cross-owner that CWC could own 49 per cent of TSTT and 100 per cent of FLOW.” He said the local regulator has embarked on an analysis of how the transaction will impact competition and how the market will be affected. He said the authority was expected to conclude that exercise by February 28, the deadline set by the parties.

In a statement, CWC’s major competitor in the Caribbean, Digicel, said it was “naturally concerned about the clear and obvious challenges and potential issues posed by such a proposed move from a regulatory and competition perspective.” Questioned on the Digicel statement, CWC’s chief executive, Phil Bentley, said the comments were very interesting because Digicel had themselves made a bid to acquire Columbus. Bentley said: “That’s a response of, if you like, a scorned lover because they didn’t buy the assets. “So I think it’s a bit rich of them to complain about us buying it because they wanted to buy it themselves. I would be very happy for you to make that point. It feels like sour grapes to us.” Asked by the Guardian whether CWC outbid Digicel for Columbus, Bentley said with a laugh: “Well, they didn’t get the business. You can draw your own conclusion from that.”

According to the Jamaica Gleaner, Digicel this week warned that it will re-examine its investment plans in Jamaica and the region if it is not happy with the terms of the proposed buyout by CWC.

The Irish firm, which has invested billions of United States dollars in the region since its first foray into Jamaica a little more than 13 years ago, last week reiterated its claim that the planned acquisition could lead to a monopoly in some sections of the regional communications sector.

“We are prepared to invest in the region but that has to be in the knowledge that there is going to be a level playing field. I think it is important that we understand what the acquisition means because we have to make choices as to where we invest our dollars,” Digicel Group CEO Colm Delves told The Sunday Gleaner.

Last week, the Jamaica Observer said that telecommunications ministers from the Organisation of Eastern Caribbean States (OECS) were to meet to discuss ramifications of the planned merger.

St Lucia’s Telecommunication Minister Dr James Fletcher said the members of the Eastern Caribbean Telecommunications Authority would meet for the talks, which he described as crucial.

The talks were expected to result in the Eastern Caribbean Telecommunications Authority formulating proposals from the merger announced two weeks ago.

On Wednesday, according to the Trinidad Express, Digicel Chairman Denis O’Brien travelled to Port of Spain to present Digicel’s arguments at the Caribbean Telecommunications Union forum at the Cascadia Hotel, St Ann’s.

He told regulators, including CTU chairman Selby Wilson that “no one in this room today is in any doubt about the significance of this proposed merger. No one here is in any doubt about the impact that this merger would have on the Caribbean telecommunications industry; and indeed on the wider economy right across the Caribbean region.”

O’Brien said, according to the Express, “We find ourselves at a crossroads for the industry. We simply must get this process right. The consequences of getting this wrong are too dire to contemplate.

“The telecoms industry will either go backwards in time to the dark ages of the monopoly provision of services circa the year 1990; or we can have vibrant and fulsome competition in the decades ahead.”

He said, according to the Express, the proposed merger of Columbus (operators of the Flow cable TV network) and Cable & Wireless will lead to a “very substantial lessening of competition in at least six geographic markets. This is because, Columbus/Flow is essentially being taken out completely as an existing direct competitor to Cable and Wireless in these markets. These markets are Jamaica, Trinidad and Tobago, Barbados, St Lucia, St Vincent and the Grenadines and Grenada.

“These are the markets where the key impact of this proposed deal will most keenly be felt by consumers”, he added.

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