Concerns have been expressed that Cable & Wireless Communication’s (CWC) proposed US$3 billion acquisition of regional cable provider Columbus International (also know as FLOW) could lead to a decline in telecommunications competition across the region and anti-competitive behaviour in T&T. The atmosphere was created after CWC announced in London yesterday that its board had agreed on terms to purchase 100 per cent of Columbus International Inc, the fibre-based telecommunications and technology services provider for US$1.85 billion. CWC will also assume Columbus’ US$1.17 billion in net debt.
CWC said it would finance the US$1.85 billion acquisition cost through the payment of US$707.5 million in cash and the issue of 1.55 billion new ordinary CWC shares to Columbus’ three major shareholders — John Risely, John Malone and Brendan Paddick — worth US$1.14 billion. If the transaction is approved, the three main Columbus shareholders will own about 36 per cent of CWC and collectively will be the telecommunications provider’s largest shareholders. The proposed transaction will bring together CWC, which has 5.7 million mobile, fixed line and Internet customers in Panama, the Caribbean and Seychelles, with the 700,000 residential of Columbus in the Caribbean, Central America and the Andean region. In T&T, the acquisition will mean CWC, which owns 49 per cent of majority state-owned TSTT, acquiring FLOW’s cable TV, Internet and telephone services. The CWC announcement said the completion of the transaction was conditional on it receiving regulatory approval in Barbados, Jamaica and T&T.
Speaking yesterday, Telecommunications Authority of T&T (TATT) CEO Cris Seecharan, said the local regulator was required to approve any change of ownership in licensed entities.
Seecharan said from a regional perspective, the acquisition of FLOW by CWC would reduce the number of players from three — FLOW, Digicel and the CWC-owned LIME — to two, Digicel and LIME. Seecharan said: “The region would be going from a position of vibrant competition among three players to the creation of an effective duopoly, which sometimes leads to a stagnation in competition that could impact on the affordability of service. “In T&T, the issue is more about the potential for anti-competitive behaviour as a result of cross-owner that CWC could own 49 per cent of TSTT and 100 per cent of FLOW.” He said the local regulator has embarked on an analysis of how the transaction will impact competition and how the market will be affected. He said the authority was expected to conclude that exercise by February 28, the deadline set by the parties.
Digicel concerned too
In a statement, CWC’s major competitor in the Caribbean, Digicel, said it was “naturally concerned about the clear and obvious challenges and potential issues posed by such a proposed move from a regulatory and competition perspective.” Questioned on the Digicel statement, CWC’s chief executive, Phil Bentley, said the comments were very interesting because Digicel had themselves made a bid to acquire Columbus. Bentley said: “That's a response of, if you like, a scorned lover because they didn't buy the assets. “So I think it's a bit rich of them to complain about us buying it because they wanted to buy it themselves. I would be very happy for you to make that point. It feels like sour grapes to us.” Asked whether CWC outbid Digicel for Columbus, Bentley said with a laugh: “Well, they didn't get the business. You can draw your own conclusion from that.” Asked to respond to Bentley’s allegation that Digicel had bid for Columbus, the Digicel spokesperson Antonia Graham said: “We would not comment on that.”
Customers getting choice
Told that the local telecom authority had expressed some concerns about the transaction, Bentley said CWC would be writing to the regulators on the issues of concern to them. “What I would say is that Digicel has been acquiring companies and rolling out fibre,” Bentley said. “I think we are confident that we will make the case that this is good for giving choice to customers. We think it is good for rolling out investment faster. It’s not often that people invest US$3 billion in the Caribbean and hopefully, people will see the positive side to that.”
Digicel said the proposed transaction raised a number of issues that would need to be addressed, including such matters as fairness in spectrum allocations, local loop unbundling and price bundling generally. The Jamaican-based company said: “A myriad of other likely issues will only become apparent once Digicel and other agencies and bodies have been fully appraised of the details of the proposed transaction and the likely resultant impact on the telecoms market in the region.”