Tue | Sep 19, 2017

Financially Speaking | The C&W era comes to an end

Published:Friday | November 20, 2015 | 11:00 AMLavern Clarke

Sometime within the next six to seven months, Jamaica's contentious and five-decade-long history with Cable & Wireless (C&W) will come to an end.

The company will cease to exist. And it's for the best, because that name was forever tainted first as a monopolistic bully and later as the purveyor of really bad service. It was honed to a fine art.

No amount of LIME was enough to scour that reputation. And ultimate parent Cable & Wireless Communications (CWC) knew it, even from its faraway perch in London and operating base in Miami.

So they chose to go with Flow, a new acquisition and a brand with high favourability. But all that just meant C&W got to upset a larger group of people. It turns out that it's really hard to switch off behavioural patterns woven over decades just by choosing a new name. Cranky LIME front-line staff are just as cranky under the Flow banner.

C&W traces its origins back 150 years to the days of the telegraph and before the telephone was invented. It became the source of communications and connectivity for assets of the empire and dominated regional telecoms close to the turn of the 21st century.

In Jamaica, that legacy was broken in 1999-2000, just when the mobile market was poised to evolve.

But fixated as it was on fixed-line domination, C&W missed its chance to corner the mobile market ahead of the liberalisation of communications across the region. Now, it is old and tottering. And John Malone's Liberty Group is about to retire it.

Who knows whether Malone had it in mind to buy CWC when he and other shareholders of Flow's creator, Columbus International, agreed to sell their regional holdings to CWC late last year for cash and shares in CWC.

It may just be that it was his Plan B after his reported play for an asset swap with Vodafone fizzled.

Now that Malone is about to reclaim Flow, perhaps he can put a stop to all that cable theft that has prejudicially erased some channels from the line-up, but not others, and is in danger of turning the pay TV side of the operation into a shadow of its former self.

All of these happenings have spelt a topsy-turvy period for telecommunications in Jamaica, and in the region, with more to come.

Assuming nothing derails the sale of CWC, Flow is about to be absorbed by the world's largest cable TV provider. Liberty Group is expected to combine the business with its existing LiLAC operations in the region.

We all want that to mean that a different player, with a different ethos, will deliver a better service. That flower power will be our liberator. What we could end up with, however, is more Latin flavour. And Spanish refresher courses may well be in order.

The speculations about what all this means for Digicel that scrappy company, which was an instant game changer for mobile services when it hit the market back in 2001 began to pick up steam in October when word of Liberty's interest in CWC was confirmed.

Although the near eight million customers that LiLAC and Flow/C&W have between them falls well short of Digicel's 13 million-plus subscriber base, few expect Digicel to be a match for Liberty. The watch is on to see whether Digicel founder Denis O'Brien will sell out to Carlos Slim's America Movil or otherwise form an alliance with the Mexican powerhouse.

The two have done business in the past, when they essentially agreed to stay out of each other's way with a tri-country asset swap that downsized to two after regulators thwarted their pact in El Salvador. Honduras and Jamaica, however, played ball.

Circumstances could force O'Brien to the table. He needs capital to build out quad-play services as a counterforce to the ongoing leakage of revenue to online tech companies that piggyback on the broadband networks of telecoms to deliver their services.

He tried an IPO, but that was derailed by differences over pricing of the shares. O'Brien wanted at least US$13 per share, but some thought US$5.70 was a fairer IPO price. He didn't budge.

Still, Digicel remains more than US$6 billion in debt. It needs breathing room. Which is why there are expectations that O'Brien may eventually do a deal at the right price.

But O'Brien also has a reputation as a scrapper, more ready to fight than retreat it's in his DNA. And it has made him super rich. He may choose to stay true to form, and if he does, exciting times are ahead for telecoms.

lavern.clarke@gleanerjm.com