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Columbus buyout may balance scales

Published:Sunday | November 23, 2014 | 12:00 AM

J. Paul Marshall, Contributor

Whenever news hits of blockbuster acquisitions of the kind we have seen more recently involving that CWC buyout of Columbus International, the near-natural tendency is to project what the changed landscape will look like. I, too, have been contemplating this.

On one hand, LIME's parent company, CWC, is talking up the deal that it will be good for Jamaica (and Caribbean) because the firm will accelerate investments in more modern telecoms infrastructure. On the other hand, Digicel is raising doubts about the prognosis for competition should the regulators approve the transaction. I, for one, support the CWC/Columbus merger - though I take Digicel's concerns with a grain (or block) of salt, especially when considered with its benevolent concern that LIME overspent on Columbus.

Here's why:

On average, the Caribbean - and, more prominently, Jamaica - is a relatively low-income-per-capita region, incapable of attracting/keeping multiple mega telecommunications investments that could reliably depend on the weak domestic spend to keep them reinvesting and on a timely basis. Eventually, the forces of consolidation will prove the common-sense option, leaving, in this case, the 'BIG 2' in the marketplace, LIME and Digicel.

To apply the classic 'tale of the tape' in assessing the competitive strength of these formidable contenders, one should first measure their individual strengths.

For instance, Digicel does not call itself the 'Bigger, Better Network' for the sake of inviting howls of dismissive laughter - the bold-faced Irish competitor is really just that. And, if Digicel had won the bid to take Columbus, the 'red giant' would have further engorged itself with, arguably, outrageous market muscle. This would likely have been a more worrisome endgame, considering LIME's vulnerability in a fair amount of the Caribbean markets it shares with Digicel in the post-liberalisation era. Plus, how would Digicel deflect the anti-competitive argument if it had cornered the deal with Columbus? I guess we will never know.

What we do know is that LIME's snapping up of Columbus may just have been what the doctor ordered. After all, the so-called 'value provider' would have had sleepless nights if Digicel were to have added Columbus to its growing list of conquests of small and medium-size cable companies (and SportsMax) in the Caribbean in recent times.

real opportunity

Importantly, LIME has said this deal will give customers better products and more choice and make the market MORE competitive with faster broadband, more reliable telephone services, a better TV experience, and the ability for customers to use their cell phones to enjoy watching what they experience at home.

I submit that that kind of lofty promise to upgrade could only have come from an investor that now sees real opportunity to make a solid return despite generally low consumer income across markets.

But, a smaller number of players in a low-income market may not necessarily be a bad idea, since the field is already not much of an attraction to new players with billions to spend. Remember when AT&T got rid of its spectrum licence to operate in Jamaica, and, more recently, Claro's short visit to our shores? By the way, I didn't hear as much anti-competitive fearmongering when Digicel gobbled up Claro, as I am now that CWC has acquired Columbus. Strange.

For utmost protection of consumers, regulators must continue to work in the best interest of citizens, which they must balance with the development of measures that will cause for the now contracted number of competitors to invest more and provide technology that can contribute to improving flagging personal income levels throughout the region, thereby making the Caribbean truly attractive to even more telecoms providers when the market dynamics are more conducive.

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