Digicel/Claro deal approved with conditions

KINGSTON, Jamaica, Wednesday August 31, 2011 – Prime Minister Bruce Golding has given the go-ahead for Digicel to acquire the Jamaica business of one of its competitors, but has insisted that Digicel maintain separate networks.

He announced the decision in the Digicel/Claro matter in Parliament yesterday where he also outlined the conditions of the approval. The green light came five months after Digicel announced that it had struck a deal to acquire Claro in Jamaica and sell its own businesses in El Salvador and Honduras to Claro’s parent company, América Móvil.

“I have approved the acquisition of Claro by Digicel and the assignment of the relevant licences without any modification to the licences and the obligations contained therein. This means that Digicel will be required to fulfil all of the obligations contained in the Claro licences with regard to the type of facility and specified service that must be provided, its interconnection obligations, licence limitations and network expansion obligations,” Golding said.

The Prime Minister said Digicel had wanted to consolidate the core networks and integrate Claro’s existing subscribers. Its intention was to decommission the Claro network and operate both licences through a single network.

But Golding said that would radically alter the existing configuration of the two networks and government did not agree to that.

“Digicel will, therefore, be required to maintain a separate network and complete a separate build-out of 90 percent penetration of the island as required under the original Claro licences,” the Prime Minister said.

He said fulfilment of those obligations would be “vigorously monitored and enforced” and the Fair Trading Commission is considering specific steps that may be taken within its statutory functions to ensure that the acquisition of Claro by Digicel does not adversely impact on the consuming public.

Golding noted that several issues arose in consideration of Digicel/Claro’s joint application for the acquisition to be approved.

Among them were: the impact that the acquisition would have on the level of competition within the mobile telecommunications market and, in this regard, concern about the wide disparity in termination rates among the carriers; credible indication that Claro would have exited the market whether or not the acquisition was approved; the service options that would be available to the approximately 517,000 Claro subscribers; and the statutory provisions and limitations governing the exercise of ministerial discretion in relation to the application.

He said the situation also brought into sharp focus the need to strengthen the legal and regulatory framework for the telecommunications industry “to bring it in line with contemporary best practices and ensure that the interest of the consumer is held paramount”.

Prime Minister Golding said it was necessary to fast-track specific elements of amendments to the existing Telecommunications Act, to enable the Regulator to discharge its obligations more effectively.

To this end, he said, efforts are being made to have the appropriate Bill brought to Parliament within the next six weeks. Click here to receive free news bulletins via email from Caribbean360. (View sample)