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Digicel to go national with 4G network

Published:Friday | January 6, 2012 | 12:00 AM
Digicel Jamaica chief executive Mark Linehan tests the new 4G Wimax service at its launch in Kingston in this August 2010 photo. - File
Mark Linehan, chief executive officer of Digicel Jamaica. File
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Undeterred by a pending legal challenge of its Claro acquisition by Jamaica's competition watchdog, Digicel Group said Thursday that it would invest the equivalent of J$2.6 billion to expand its 4G network nationwide.

The 4G service is currently limited to Kingston and St Catherine.

Digicel wrapped up the acquisition of Claro's Jamaican assets, including its 3G network, on November 30 and has began laying off the staff. The telecoms now says it is ready to launch new initiatives in its home market.

"The initiatives will see Jamaica benefiting from super-fast mobile technology through the introduction of islandwide 4G mobile, lower cross-network calling rates and an intent to bring complimentary wireless access to primary and secondary schools and post offices in remote locations," the company said in a release.

"As a result of the acquisition, Digicel will be investing a further US$30 million in the roll-out of its 4G mobile services - in addition to its existing investment of over US$1 billion in Jamaica ... ."

The investment will deliver high-speed mobile Internet service to 80 per cent of Jamaica, the telecoms said.

"Our 4G mobile service will deliver speeds of up to five times faster than legacy 3G services and will be complemented by our commitment to best value and best service. 4G mobile opens up a world of possibilities for our customers," said Digicel Jamaica CEO Mark Linehan.

Claro staff layoff

The Claro staff are being laid off under what Linehan calls an Enhanced Separation Programme, which offers a bonus for weeks pay above the required redundancy payments, continuing health care, lunch allowances and phone credit benefits for three months.

He said the service of some employees will be retained for several months but that the entire staff have been offered the separation package.

Meantime, as Digicel moves to consolidate its new asset, the Fair Trading Commission expects to be back in court at month-end to have the Digicel-Claro deal declared uncompetitive and unlawful.

FTC legal counsel Dr Delroy Beckford told the Financial Gleaner that it was not beyond the realm of possibility that a successful case could result in a cancellation of the acquisition.

"It is for the courts to determine that question. The point is that if the agreement is not enforceable then anything that springs from it is likely to be subject to challenge," Beckford said.

The FTC said it won't seek to prevent Claro from exiting the local market but rejects the manner in which it occurred. The agency reportedly argued in its suit that consumer expenditure dropped by two per cent while talk time increased by 39 per cent since the entry of Claro to the market in 2007. FTC argues that the acquisition would likely damage competition and stymie consumer benefits going forward.

"We are seeking a declaration from the Supreme Court that the underlying agreement between Digicel and Claro would have or is likely have the effect of lessening competition substantially in the telecommunications market, and that the agreement is therefore unenforceable under section 17 of the Fair Competition Act, 1993," said Dr Beckford.

Digicel is swapping its business in El Salvador and Honduras for the Jamaican asset, but one piece of the deal, El Salvador, is yet to be completed.

In exchange for Jamaica's approval, then Prime Minister Bruce Golding said that Digicel agreed to reduce calling rates across networks by J$3 and J$2 for peak and off-peak periods, respectively. That means it will cost 16 per cent less to call LIME phones from a Digicel phone during peak hours - down from J$17.70 to J$14.70 - but the reduction was insufficient for then government member Karl Samuda and then Opposition Spokesman on Telecommunications Philip Paulwell.

LIME has tried to block the Claro-Digicel deal but its case was thrown out in the Supreme Court. LIME is appealing the ruling.

Digicel holds a commanding market share of more than two million customers.

business@gleanerjm.com