Digicel-Claro telecom deal evokes fear of monopolised market
Published:Sunday | April 24, 2011 | 12:00 AM
Mark Titus, Business Reporter
Karl Samuda, minister of industry, investment and commerce, is seeking to calm fears that the acquisition of Claro Jamaica by Digicel Group would entrench the latter's already dominant position and deter future investors from entering the telecommunications market.
However, Samuda himself is concerned about the spectre the deal evokes.
"I am vehemently opposed to monopolies," he told Sunday Business. "Anything that suggests the re-emergence of a monopoly is something we will be monitoring very closely because we don't want to return to a situation where we have a dominant supplier taking advantage of other players in the system - whether new or old."
The minister, whose primary role is to encourage and facilitate business investment, says the Government is keeping watch on the transaction through the Fair Trading Commission (FTC).
"... Because the bottom line is that I am very concerned about the emergence of a monopoly situation, especially in an area of communication and the transfer of information," he said.
Samuda did not spell out how the Government would protect small and future investors, but telecoms industry sources say consideration is being given to tightening regulations on dominance, as well as adding potential riders to the Claro licence that Digicel is said to be acquiring.
Agreement
Digicel, which has an estimated 88 per cent of Jamaican mobile users on its network, according to a survey conducted by the Mona School of Business at the University of the West Indies, announced last month that it had signed an agreement with América Móvil to acquire its local Claro operation.
The deal will also see Digicel selling its business in El Salvador and Honduras to América Móvil, and América Móvil acquiring Digicel's business in those countries, but the financial terms of the transaction, which will include a net cash payment to the Irish-owned company, have not been disclosed.
Phillip Paulwell, former minister of industry and commerce, who is credited with spearheading the liberalisation of the telecoms sector in the early 1990s, described the proposed merger as a double-edged sword.
"The likelihood exists that Jamaica may be seen in a negative light by potential investors with Digicel holding such a dominant position in the market," he told Sunday Business. But on the other hand, when one sees Digicel pulling in the big profits, they might be more than willing to set up shop here.
"It is, therefore, crucial that the regulatory framework, such as inter-connection issues, be in place to protect the smaller players and any potential new investor," Paulwell said.
International and local consumer groups have argued that the merger of Digicel and Claro would effectively lessen competition and potentially affect service delivery to consumers.
Telecommunications Minister Daryl Vaz, who must approve the deal, declined comment for this story saying he would not speak on the issue until he had been briefed by the FTC and Office of Utilities Regulation.