By Cathrona Samuel
On a global scale, consolidation in major industries has been rampant. Businesses have come together to leverage expertise in technology and larger economies of scale through merged market shares.
The global trend towards consolidation has also been quite evident in the Caribbean. Over the past 14 months, much of the telecommunications infrastructure in the region has changed hands a few times. In March 2015, Cable & Wireless Communications announced a merger between itself and Columbus International, in which it had acquired 100% of its equity.[1] A little more than a year later, in May this year, Liberty Global announced that it had completed its acquisition of Cable & Wireless Communications. Liberty Global is the largest international TV and broadband company, and to date, this is the largest consolidation that has taken place in the Caribbean and Latin American market.[2]
Horizontal mergers and acquisitions usually have a significant impact on the market landscape. The combination of assets, expertise and technology can result in improved and innovative services being made available to consumers. However, it can also reduce the effectiveness of competition, by reducing the players in the market and preventing new entrants. The telecoms sector in the Caribbean has a history of being monopolistic, and this recent move could indicate a trend back towards that.
What makes a sole dominant provider a threat to the market? It is the capacity that they posses to abuse market power. Essentially, this is why telecoms regulation has to be placed at the top of the agenda for most if not all of the Caribbean territories. It is important that in light of the recent consolidation, a proper framework is in place across the region to respond appropriately.
It could be said that given the relatively small size of the Caribbean telecoms market, it is not feasible to have multiple operators and that mergers, acquisitions should be expected to continue. It could also be said that this recent acquisition does not represent a market takeover by one company, but with assets now valued at over 10 billion dollars, and a total subscriber base of over 10 million, there is huge potential for that.[3]
Concerns about imbalances created in the competitive landscape of the market will only intensify as a result of this. The initial merger/acquisition between Columbus International and Cable & Wireless was met with opposition from many sectors of society. One of the loudest voices, as expected, was that of the other major player in the market Digicel. Their first response was to point to the regulatory approvals that would need to be granted by authorities and ministers across the region.[4]
Territories with more organised competition laws, such as Barbados, through their Fair Trading Commission, were able to consider the merger application, and put forward conditions that mandated that there would be no overlap of fibre cables and that pre-existing customers of both entities be released of contracts free of penalties.[5]
Similarly, in Jamaica, the Minister with responsibility for technology placed restrictions on the merged entity, including access obligations.
Members of the Eastern Caribbean Telecoms Authority (ECTEL) also gave consideration to the fact that this move required upgrading of laws across the region. They acknowledged that this provided the opportunity for the introduction of their newly proposed Electronic Communications Bill, and stressed the need for the establishment of a Fair Trading Commission.
Michael Fries, CEO of Liberty Global has given assurances that there would be no major changes to product and service offerings and the business structure of the next few months.[6] However, the region must begin to consider, and anticipate future developments.
There needs to be a move to establish competition watchdogs operating across the region on a uniform set of principles. There are competition authorities in Trinidad, Jamaica, Guyana, Barbados, and the Bahamas.[7] Other territories have only pledged to put such structures in place. Having a collective response to requests for mergers or acquisitions will ensure that a proper analysis is done on the impact of such arrangements on consumers, and the market overall. It will also place clear requirements on operators seeking to consolidate, such as selling portions of their infrastructure in advance, and restrictions on transferring subscribers to prevent them from being positioned to abuse a dominant market position.
The efforts over the last decade in the region to promote competitive environments in the telecoms sector cannot be derailed. It is important that this recent development and others are viewed in light of how they affect the goal of promoting affordable access to services, innovation, and growth in the market.
References
[1] http://www.cwc.com/live/news-and-media/press-releases/cwccolumbus-merger-finalized.html
[2] ‘Liberty Global Completes Acquisition of Cable & Wireless Communications Plc | Business Wire’ (16 May 2016) <http://www.businesswire.com>.
[3] ibid.
[4] ‘Jamaica Observer Limited’ (Jamaica Observer) <http://www.jamaicaobserver.com>.
[5] http://www.ftc.gov.bb
[6] ‘Cable & Wireless Is Out, Liberty Global Is in | Barbados Today’ <http://www.barbadostoday.bb>.
[7] http://www.caricomcompetitioncommission.com/en/competition
eCommerce4 months ago