The good, the bad, and the ugly
The Cable & Wireless acquisition of Columbus Communications came as a shock to many, and has spurred a lot of concern among customers, industry observers and employees of both entities across the region.
For those of us who keep regular tabs on what is happening in the industry, regionally and internationally, this acquisition does not come as a surprise, but serves to confirm suspicions that have been brewing for months. Many industry pundits, myself included, knew that CWC was up to something, but we couldn't figure out just what it was.
When one looks at what transpired over the past four or so years, the company that most came to know as Cable & Wireless, the monopoly from back in the day, has changed quite a bit. Let me give a quick history. Cable and Wireless (plc) is what many of us knew as the dominant monopoly before liberalisation of the telecoms industry in Jamaica (2000). What many may not be aware of is that Cable & Wireless Communications (CWC) is not the same entity. Cable and Wireless Communications only came into existence in 2010 as a result of the demerger of Cable and Wireless (plc) into two entities, Cable & Wireless Worldwide (CWW) and Cable & Wireless Communications (CWC).
CWW was recently acquired by European telecoms giant Vodafone. In the last three years or so, CWC began to focus its operations in Latin America and the Caribbean by divesting itself of many of its other businesses and what could be termed 'dead weight' in other countries. The result, it appears, is a more nimble, focused entity in CWC that, by the way, has a lot of cash to spare.
CWC is the parent company of LIME. This relationship is important to understand because many of us still view LIME and its parent CWC in the context of the pre-2010 Cable & Wireless behemoth and monopoly that many of us came to dislike. This is the first hurdle this new CWC-LIME-Columbus entity will have to overcome, especially here in Jamaica. The only redeeming grace is that Columbus-Flow was not too bad in the value and service area, so hopefully all of that will rub off on CWC-LIME.
I want now to delve into some of the other real considerations of this acquisition. Is it good? Is it bad? And how will it affect us.
It had to happen! This is the general consensus among many of us who have been watching these developments over time, primarily because it was the only way for CWC to remain viable in light of similar strategic moves by its main competitor. Don't forget that compared to Digicel, CWC has just over five million subscribers in 17 markets, while Digicel has more than 13 million in 33 markets. Additionally, Digicel has been aggressively building out fibre networks across many of its markets and buying up cable operators and content providers in an effort to position itself for the new content-delivery dispensation that will define telecommunications providers moving forward. In that respect CWC, was falling behind the Digicel juggernaut, so it had to do something to stay relevant.
Suppose there was no more CWC-LIME? Let's look at possible outcomes as it relates to the Jamaican situation.
1. CWC-LIME exits, leaving a huge void in the mobile & landline service and broadband delivery which Digicel would be all too happy to fill, thereby creating a monopoly, while Columbus-FLOW dominates the landline, broadband and cable space.
2. Digicel buys Columbus (which I understand it tried to do), thereby controlling mobile, broadband data, landline and cable. This would, in effect, put the last nail in CWC's coffin, as it would no longer be viable.
3. Columbus buys CWC (which does not make sense, but for argument's sake) and again a monopoly would be created, with Columbus controlling landline, broadband and cable, leaving a gap in the mobile-service space, which Digicel would no doubt capitalise on.
4. CWC buys Columbus in a desperate attempt to stay viable, assumes a monopoly on landline, broadband, and cable, and starts to compete with Digicel, which already has mobile-service monopoly, but is rapidly moving to catch up and establish itself in the broadband and cable space.
5. CWC-LIME exits, Digicel buys Columbus, and is the last man standing.
When you start to look at these scenarios, some things become painfully obvious, right? Furthermore, this acquisition is subject to regulatory and ministerial approval, which I am sure Digicel will start lobbying quite heavily against, even though it has done some acquisitions and mergers of its own that did not seem to meet much ministerial or regulatory resistance.
And this is only the case as it exists in Jamaica. In the words of one of my wiser colleagues, if you want to see confusion, go look at what is happening in Trinidad. In Trinidad, CWC owns 49 per cent of the government-controlled Telecommunications Services of Trinidad and Tobago Limited (TSTT). In other words, it now owns what was its biggest competitor. If the acquisition is approved by the government, which also holds a 51 per cent stake in TSTT, that will be the new monopoly in Trinidad and Tobago. How do you like them apples?
Ultimately, we will have to see where the chips fall over the next few months. A couple of things are certain, though: This acquisition is seismic in the effects it will have on the industry, both locally and regionally. The resulting duopoly will bring about some serious competition in the local sector and, possibly, real value for the consumer if, and only if, our trusted regulators do what they are mandated to do and the requisite legislation is put in place.
If CWC is unable to quickly overcome the negative stigma attached to its brand and paint a more rosy picture of value and service delivery to its customers, it would have squandered a major opportunity (and a whole lot of money) and failed to re-establish itself as a major force to be reckoned with.
n Trevor Forrest is CEO of 876 Technology Solutions, a company specialising in website design, cloud hosting and document management. Email feedback to email@example.com and trevorforrest