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Digicel to stay put in El Salvador

Published:Friday | October 19, 2012 | 12:00 AM
The Digicel building in downtown Kingston. - File
The Digicel building in downtown Kingston. - File

Digicel Group has changed gears and is now prepared to continue doing business in El Salvador after an unyielding regulator twice scuttled plans to sell its holdings to America Movil subsidiary, Claro.

The two companies mutually agreed last week to exit the agreement that was initially struck 18 months ago.

Digicel told the Financial Gleaner on Wednesday that it will stay in El Salvador for the long haul, but declined comment on whether it was offered incentives to remain in that market where it is the second largest operator after Claro.

"It is now business as usual for us in El Salvador," said Digicel's chief spokeswoman Antonia Graham.

"While we will not be giving any financial information, we are there for the long term. Further, we are excited by the opportunities we see which, to some extent, we have had to temper over the past 18 months but will now be actively pursuing."

Graham, the head of group public relations, was vague on the 'opportunities' saying such information is "commercially sensitive".

Digicel Group had expected to book a gain of about US$350 million from what was expected to be a tri-country deal with America Movil. On Wednesday, the telecoms headquartered in Kingston declined to say how much of its gains were lost to the failed third leg of the transaction. The Jamaica and Honduras legs have already been executed.

Candid about decision

Competition body Superintendencia de Competencia (SC) was candid about its reasons for denying, for a second time, the deal between America Movil and Digicel Group for the Mexican firm to acquire 100 per cent of the operation in the Central American country.

The SC called Digicel a price maverick, whose entry in El Salvador had helped to drive mobile rates down and opened up the market there, in its 129-page rationale. The regulator first denied the deal in May 2011, then insisting that AMX would have to give up 20 megahertz of spectrum that would be part of the package of Digicel assets as a condition of approval.

That turned out to be a non-starter for AMX and while the application for approval was resubmitted, SC again said no in September 2012, citing worries that the deal would make the market less competitive if a major player like Digicel exits. In that ruling, it said that Claro's acquisition of the spectrum would leave just 10 MHz for other market entrants and would be unattractive to serious investors.

The Digicel transaction would have strengthened the Claro operations, which is already the dominant player.

Claro earned US$368 million in 2010 followed by Digicel with US$124 million, according to the competition regulator.

Digicel is owned and controlled by Irish billionaire investor Denis O'Brien; and Claro by Mexican billionaire Carlos Slim Helu.