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EDITORIAL - The Digicel-Claro merger

Published:Friday | March 25, 2011 | 12:00 AM

We make no comment about the Moriarity Report that was published in Ireland this week and made adverse findings about how Mr Denis O'Brien, the owner of the Jamaica-based telecoms company, Digicel, acquired a mobile telephone licence in Ireland a decade and a half ago.

Indeed, Mr O'Brien, a skilled scrapper, has been vigorously defending himself against the assertions of the declarations of Justice Moriarity, including calling for an investigation into his conduct.

Coincidentally, however, the Moriarity Report was published in the immediate aftermath of Digicel's announcement that it will acquire the Jamaican operation of Carlos Slim's América Móvil, which operates in this market as Claro. As part of the same deal, América Móvil will acquire Digicel's businesses in Honduras and El Salvador.

In effect, both companies are understandably swapping operations, thereby easing their vulnerabilities to competition in their respective zones of dominance.

Consumer alarm

Jamaican consumers are understandably concerned about the development.

Prior to Digicel's arrival in Jamaica a decade ago, at the liberalisation of the island's telecoms market, Jamaica suffered from an inadequate and expensive telecommunications sector.

Telephone penetration, generally, was low, and mobile service was, by and large, seen as an offering for the elite. Cable & Wireless, then the monopoly provider of telephone and most other telecoms services, operated like monopolies generally do: fat and lazy with poor customer service.

Competition has changed the environment. Telecoms prices have fallen. A broad suite of services is on offer and attention to customer service is far more robust. That has been good for the economy.

But with regard to telephony, if there is anyone with the potential to take Jamaica to the bad old days, it is Digicel.

It has not only broke Cable & Wireless' monopoly in Jamaica and most of the rest of the English-speaking Caribbean, but could become, crudely speaking, the new monopoly. Already it is the dominant player in Jamaica, with more than two million subscribers and perhaps close to 80 per cent of the market.

Prodded by other players

Of course, Digicel could not have arrived at this position if it did not offer products and services at prices consumers felt were worth paying for at the rates they do. There is no doubt, though, that Digicel would also have been prodded by the other players in the market, including Claro, whose aggressive pricing and marketing could not be ignored.

It is in that context that consumers' concerns are worthy of attention. They need assurances that Digicel will not evolve into a monopoly or will abuse a dominant position that will become more so with the acquisition of Claro.

It need not come to this.

As Digicel disclosed, its acquisition of Claro Jamaica will require regulatory approval. So, we expect that the Office of Utilities Regulation will have done the necessary work and provide the de facto communications minister with appropriate terms, upon which he will insist, if he is to approve the deal.

Additionally, the Fair Trading Commission is expected to be vigilant in ensuring that there is no abuse of the dominant position and that there is genuine competition.

But if Mr O'Brien is as smart as we assume him to be, he will offer Digicel's existing, acquired and future customers a consumer charter and a verifiable pledge by which it will do business in the new environment.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.