An­tho­ny Wil­son

On Thurs­day, mil­lions of peo­ple across the Caribbean woke up to the news that Ca­ble & Wire­less Com­mu­ni­ca­tions, which has been op­er­at­ing in the Caribbean for more than 130 years, had ac­quired ca­ble and fi­bre provider Colum­bus In­ter­na­tion­al Inc (which trades across the re­gion as Flow) for US$1.85 bil­lion plus US$1.17 bil­lion in net debt.

The trans­ac­tion brings to­geth­er CWC–which is strong across the Caribbean in mo­bile, In­ter­net and home phone ser­vices and al­so pro­vides tele­vi­sion con­tent–with Flow, that is strong across the re­gion with its In­ter­net and ca­ble of­fer­ings and in busi­ness-to-busi­ness ser­vices, but not so strong in the pro­vi­sion of home phone (land­line) ser­vice.

CWC has just over 2 mil­lion cus­tomers in the 13 Caribbean coun­tries that use the LIME brand, plus a 49 per cent stake in TSTT, while Colum­bus, on­ly es­tab­lished in 2005, has 700,000 res­i­den­tial cus­tomers in the Caribbean, Cen­tral Amer­i­ca and parts of South Amer­i­ca, as well as in­for­ma­tion tech­nol­o­gy ser­vices to busi­ness­es.

If ap­proved by the CWC share­hold­ers, and reg­u­la­tors in T&T, Bar­ba­dos and Ja­maica, the pro­posed merg­er will cre­ate a re­gion­al telecom­mu­ni­ca­tions that would be a strong quad play­er–mean­ing pro­vid­ing mo­bile, In­ter­net, ca­ble tele­vi­sion and in home phone ser­vice–across the Caribbean

Across the Caribbean, the merged and en­larged CWC will face one bit­ter cor­po­rate en­e­my: Dig­i­cel, ma­jor­i­ty owned by Irish bil­lion­aire, De­nis O'Brien, and es­tab­lished on­ly 13 years ago.Dig­i­cel op­er­ates in 21 Caribbean coun­tries as well as Cen­tral Amer­i­ca, Ocea­nia and French Guyana in South Amer­i­ca.

While Dig­i­cel made its name as a mo­bile op­er­a­tor through­out the Caribbean, it has re­cent­ly po­si­tioned it­self to be­come a quad-play provider, of­fer­ing mo­bile, broad­band, tele­vi­sion and land­line, par­tic­u­lar­ly to busi­ness places.

Dig­i­cel's re­cent moves in­clude:

�2 In Oc­to­ber, the com­pa­ny launched its fi­bre-to-busi­ness of­fer­ing, which aims to pro­vide busi­ness­es, small and large, with In­ter­net con­nec­tiv­i­ty of up to 100MB.

Al­though huge­ly ex­pen­sive to in­stall, fi­bre to busi­ness­es is po­ten­tial­ly a very lu­cra­tive ven­ture for Dig­i­cel, which it would like to mo­nop­o­lise.A lo­cal busi­ness with a fi­bre con­nec­tion will au­to­mat­i­cal­ly be able to of­fer its em­ploy­ees ex­treme­ly fast, in­ter­nal, da­ta down­load speeds, mo­bile tele­pho­ny, tele­vi­sion con­tent and PBX (land­line-type) con­nec­tiv­i­ty, both lo­cal­ly and re­gion­al­ly. In­stalling fi­bre al­lows Dig­i­cel to be­come a quad-play op­er­a­tor in T&T, one of its larg­er mar­kets.

The fi­bre-to-busi­ness of­fer­ing would fa­cil­i­tate, for ex­am­ple, some­one call­ing the Guardian Hold­ings of­fice in West­moor­ings and be­ing trans­ferred to the com­pa­ny's Ja­maican of­fice, for the cost of a lo­cal call.It al­so al­lows video con­fer­enc­ing, mul­ti­me­dia stream­ing and VOIP ap­pli­ca­tions

Dig­i­cel is plan­ning sim­i­lar fi­bre-to-busi­ness of­fer­ings in Bar­ba­dos, Haiti and Ja­maica;

Com­pe­ti­tion: Flow al­ready of­fers a 100MB down­load speed ser­vice to small and medi­um-sized busi­ness­es and high-in­come house­holds in Trinidad, which CWC will in­her­it, at $650 a month.This means that the en­larged CWC will go head-to-head with Dig­i­cel in of­fer­ing high-speed broad­band In­ter­net ser­vices when the Irish-owned com­pa­ny ful­ly rolls out its ser­vice;

�2 In Oc­to­ber, as well, a com­pa­ny called Sier­ra Sup­port Ser­vices ran full-page news­pa­per ad­ver­tise­ments seek­ing to em­ploy over 30 fi­bre in­stal­la­tion man­agers and su­per­vi­sors. Sier­ra is owned and con­trolled by De­nis O'Brien, the Irish bil­lion­aire who al­so owns and con­trols Dig­i­cel.

Pre­sum­ably, this means Dig­i­cel will out­source its fi­bre in­stal­la­tion to Sier­ra. But it al­so prob­a­bly means that Dig­i­cel is not go­ing to be sat­is­fied with sim­ply of­fer­ing fi­bre to busi­ness­es and will seek to bring fi­bre to homes in high-in­come ur­ban cen­tres like West­moor­ings and Lange Park;

�2 In Sep­tem­ber, Dig­i­cel closed a trans­ac­tion in­volv­ing the pur­chase of a sub­ma­rine fi­bre op­tic ca­ble net­work pro­vid­ing ca­pac­i­ty from Trinidad and con­nect­ing 12 coun­tries to Puer­to Ri­co with on­wards con­nec­tiv­i­ty to the Unit­ed States.

That deal gives the com­pa­ny an in­ter­na­tion­al fi­bre-con­nec­tiv­i­ty back­bone that fa­cil­i­tates and glob­al­izes the fi­bre-to-busi­ness of­fer­ing in T&T;

Com­pe­ti­tion: Be­fore Thurs­day's an­nounce­ment, CWC and Colum­bus were part­ners (27.5% and 72.5% re­spec­tive­ly) in a sub­ma­rine ca­ble net­work con­nect­ing 42 coun­tries in the Caribbean and Latin Amer­i­ca, span­ning 42,000 kilo­me­tres. If the trans­ac­tion is ap­proved CWC will own 100 per cent of that com­pa­ny;

�2 In Sep­tem­ber, as well, the com­pa­ny an­nounced that it had ac­quired ma­jor­i­ty own­er­ship and con­trol of the par­ent re­gion­al sports broad­cast­er, Sports Max, pro­vid­ing Dig­i­cel with con­tent for its tele­vi­sion of­fer­ing

�2 In the last six months, Dig­i­cel has hired jour­nal­ists in Ja­maica, Bar­ba­dos and T&T as it launched a mo­bile app called Loop that pro­vides news and in­for­ma­tion to the com­pa­ny's mo­bile sub­scribers.

Com­pe­ti­tion: With Sports Max and Loop, Dig­i­cel may be think­ing of es­tab­lish­ing a re­gion­al broad­cast­ing com­pa­ny that would pro­vide di­rect com­pe­ti­tion to One Caribbean Me­dia, the In­de­pen­dence Square-based com­pa­ny with re­gion­al news­pa­per and broad­cast­ing of­fer­ings

�2 In T&T in Au­gust, Dig­i­cel ap­plied to the Telecom­mu­ni­ca­tions Au­thor­i­ty for a li­cence to pro­vide a sub­scrip­tion broad­cast­ing ser­vice via a telecom­mu­ni­ca­tions net­work. In short, Dig­i­cel wants to be able to of­fer ca­ble en­ter­tain­ment to house­holds in T&T.

Com­pe­ti­tion: If Dig­i­cel's ap­pli­ca­tion is ap­proved, this would bring it in­to di­rect com­pe­ti­tion with Di­recTV, Green­Dot and CWC/Flow in Trinidad.

�2 Over the course of the last year, Dig­i­cel has been buy­ing up ca­ble com­pa­nies in the north Caribbean. Four trans­ac­tions have pro­vid­ed Dig­i­cel with ca­ble tele­vi­sion, broad­band and tele­pho­ny ac­cess in Ja­maica, Turks and Caicos, Do­mini­ca, An­guil­la, Nevis and Montser­rat.

In a sense, in those six mar­kets, Dig­i­cel is al­ready a quad-play provider and its fi­bre-to-busi­ness roll­out, when com­plet­ed, will make the com­pa­ny a quad-play provider in Bar­ba­dos, Haiti and Trinidad.

Ques­tions for Dig­i­cel

On Fri­day morn­ing, the Sun­day BG sent fol­low-up ques­tions to An­to­nia Gra­ham, the Dig­i­cel Group spokesper­son, who is based in Ja­maica.

The ques­tion­ing went like this: Does CWC ac­quir­ing Colum­bus change the com­pe­ti­tion pic­ture in T&T? TSTT is a quad-play provider, Dig­i­cel is rolling out fi­bre, which would al­low it to be­come a quad-play provider and CWC (with Flow) may be a quad-play provider soon. If TSTT sells its 49 per cent stake in TSTT, won't there be three strong large quad-play providers in T&T and won't that mean MORE in­tense com­pe­ti­tion (which favours con­sumers) and not less?

An­swers from Dig­i­cel

The com­pa­ny re­spond­ed by stat­ing: "As CWC (with its 49 stake in TSTT) and Flow are each oth­ers main com­peti­tors for fixed tele­pho­ny and fixed broad­band in T&T, the merged com­pa­ny would hold a near mo­nop­oly po­si­tion for these ser­vices.

"The com­bined en­ti­ty may al­so en­joy sig­nif­i­cant in­fra­struc­tur­al ad­van­tages that could be dif­fi­cult for com­peti­tors to repli­cate in the short term and this could en­able it to raise prices."

In a lengthy state­ment to the Sun­day BG, Dig­i­cel al­so called for a com­pre­hen­sive and trans­par­ent ap­proval process that would al­low all stake­hold­ers (in­clud­ing Dig­i­cel) to have their say.

Is Dig­i­cel right?

Dig­i­cel is right that TSTT (not CWC) and Flow are di­rect com­peti­tors in fixed-line tele­pho­ny and fixed broad­band.But TSTT and CWC are en­tire­ly dif­fer­ent en­ti­ties and the Gov­ern­ment of T&T has own­er­ship and man­age­ment con­trol over TSTT.

And yes, while TSTT (not CWC) and Flow are di­rect com­peti­tors in fixed (land­line) ser­vices in T&T, all tele­com ex­perts ac­knowl­edge that land­lines to the home is a busi­ness in de­cline and the re­al mon­ey is to be made by of­fer­ing bun­dled fi­bre ser­vices to busi­ness­es, which Dig­i­cel is rolling out.Al­so, the broad­band sit­u­a­tion is a lit­tle more com­pli­cat­ed than Dig­i­cel seems to think.

TSTT had 94,000 broad­band sub­scribers, as at Sep­tem­ber 30, 2014, which was down by 13 per cent from 108,000 a year ear­li­er, ac­cord­ing to CWC's six-month fi­nan­cial re­port, re­leased on Thurs­day, the same day as the an­nounce­ment.Ac­cord­ing to the Telecom­mu­ni­ca­tions Au­thor­i­ty of T&T's (TATT) most re­cent quar­ter­ly re­port, this coun­try had 228,000 fixed In­ter­net (broad­band) sub­scrip­tions as at the end of June 2014.

This means, with a lit­tle ex­trap­o­la­tion, that TSTT has 41 per cent of the fixed broad­band and that its share of that mar­ket is in de­cline.The mar­ket fox fixed broad­band in T&T has de­clined by 1 per cent if the June 2014 da­ta are com­pared with June 2013.But at on­ly 53 per cent pen­e­tra­tion in June , ac­cord­ing to the TATT, there is room for some ex­pan­sion in this mar­ket if com­pe­ti­tion leads to a de­crease in prices.

More­over, the gross rev­enues from all fixed broad­band of­fer­ings in T&T at the end of June was $178 mil­lion. While this was a nine per cent in­crease from a year ear­li­er, rev­enues from fixed broad­band are dwarfed by the gross rev­enues gen­er­at­ed by mo­bile voice ser­vices, which amount­ed to $686 mil­lion at the end of June 2014.As well, the fol­low­ing com­pa­nies pro­vide fixed broad­band ser­vice in T&T–Lisa Com­mu­ni­ca­tions, Massy Com­mu­ni­ca­tions, Green Dot and Open Tele­com.

Is fixed broad­bandthe fu­ture?

The TATT quar­ter­ly re­port makes it very clear that the fu­ture of broad­band in T&T (as else­where) is mo­bile broad­band.The pen­e­tra­tion for mo­bile broad­band sub­scrip­tions in­creased by 20 per cent to 36,000 in June 2014 com­pared with a year ear­li­er.

What's more is that the TATT board for­ward­ed to its line min­is­ter in "ear­ly Sep­tem­ber" its rec­om­men­da­tions for the award of li­cences in the 700 Mhz spec­trum, the so-called LTE (long-term evo­lu­tion) band, which al­lows providers to de­liv­er en­hanced mo­bile da­ta ser­vices.

Ac­cord­ing to the Jan­u­ary 2014 edi­tion of TATT Bytes, the reg­u­la­tor's mag­a­zine, the au­thor­i­ty is look­ing to at­tract providers via the fol­low­ing mech­a­nism:

1) Award li­cences for the 700 MHz spec­trum to in­cum­bent mo­bile op­er­a­tor(s) and or po­ten­tial third mo­bile op­er­a­tor;

2) Po­ten­tial for award of a con­ces­sion to a third op­er­a­tor;

3) Po­ten­tial award of li­cences for avail­able 850 MHz and 1900 MHz spec­trum to a third mo­bile op­er­a­tor.

Ob­vi­ous­ly, the 700 MHz spec­trum–for which Dig­i­cel is in with a chance of win­ning–would be the crown jew­el for lo­cal mo­bile op­er­a­tors.CWC and Flow have both ap­plied for the LTE spec­trum and the de­ci­sion is up to Cab­i­net, which as is of­ten the case, is sharply di­vid­ed on this is­sue be­tween those who favour go­ing with the TATT rec­om­men­da­tions and those who wish to carve out a niche for the lega­cy, ma­jor­i­ty state-owned com­pa­ny, TSTT.

One says no more on that is­sue, at this point, ex­cept to add that Sec­tion 21 (1) of the Telecom­mu­ni­ca­tions Act states: "No per­son shall op­er­ate a pub­lic telecom­mu­ni­ca­tions net­work, pro­vide a pub­lic telecom­mu­ni­ca­tions ser­vice or broad­cast­ing ser­vice, with­out a con­ces­sion grant­ed by the min­is­ter."Sub­sec­tion 5 of clause 21 states that TATT has 90 days of re­ceiv­ing all rel­e­vant in­for­ma­tion onan ap­pli­ca­tion to sub­mit a rec­om­men­da­tion to the min­is­ter.

The min­is­ter (which in this case means Cab­i­net) then has 60 days to in­di­cate his ap­proval, mod­i­fi­ca­tion or re­jec­tion of the rec­om­men­da­tion.Sub­sec­tion 9 of clause 21 states that if the min­is­ter has not in­di­cat­ed to the au­thor­i­ty in writ­ing with­in 60 days whether he is ap­prov­ing, mod­i­fy­ing or re­ject­ing the rec­om­men­da­tion "it shall be deemed to have been ap­proved."

Ques­tioned on the fact that the min­is­ter has had TATT's rec­om­men­da­tion since "ear­ly Sep­tem­ber" which would make it close to 60 days, the au­thor­i­ty's CEO Cris Seecha­ran, said Cab­i­net had sought some clar­i­fi­ca­tions on the rec­om­men­da­tions made by TATT and there­fore the clock has had to be restart­ed.

He said he did not have the in­for­ma­tion on when the clar­i­fi­ca­tions were pro­vid­ed and he would need to check his cor­po­rate sec­re­tary.He al­so drew a dis­tinc­tion be­tween a com­pet­i­tive bid process and an ap­pli­ca­tion made by a po­ten­tial op­er­a­tor, sug­gest­ing that the 60 day lim­it for Cab­i­net ap­proval may not ap­ply to com­pet­i­tive process­es, such as the 700 MHz process.

...Where does all of this leave TSTT?

Dig­i­cel has al­ready in­di­cat­ed that it is like­ly to chal­lenge the ac­qui­si­tion of Flow by CWC, if the lat­ter re­tains its 49 per cent stake in TSTT.The CEO of TATT, Cris Seecha­ran, al­so de­scribed the sit­u­a­tion of cross-own­er­ship by CWC of 49 per cent in TSTT and 100 per cent of Colum­bus as po­ten­tial­ly an­ti-com­pet­i­tive.TATT is al­most cer­tain to block the ac­qui­si­tion of Colum­bus by CWC if the Lon­don-based com­pa­ny does not sell its stake in TSTT.

And CWC's 59-page an­nounce­ment of the trans­ac­tion on Thurs­day makes it clear that the reg­u­la­tors in T&T, Ja­maica and Bar­ba­dos MUST all ap­prove the ac­qui­si­tion for the trans­ac­tion to be com­plet­ed.So, CWC will at­tempt to hold talks with Fi­nance Min­is­ter Lar­ry Howai with­in the next ten days and it is ex­pect­ed to make a firm of­fer to sell the 49 per cent stake in TSTT.

Should the Cab­i­net not ap­prove or de­lays ap­proval un­du­ly, the pur­chase of CWC's 49 per cent stake by Na­tion­al En­ter­pris­es Ltd (the in­vest­ment hold­ing com­pa­ny that owns the State's 51 per cent stake), the deal would be dead.But that would leave a half-baked TSTT fac­ing the prospect of pre­vi­ous­ly un­seen com­pe­ti­tion in the 700 MHz (LTE) space, which is the fu­ture of mo­bile rev­enues.

Al­ter­na­tive­ly, if TSTT and CWC are not en­e­mies, the ma­jor­i­ty state-owned com­pa­ny can fa­cil­i­tate the roll­out of the LTE spec­trum by CWC/Flow by mak­ing its cell tow­ers and oth­er in­fra­struc­ture avail­able to the en­larged en­ti­ty.Clear­ly, Cab­i­net has some lever­age if not a whole lot of time.

Cab­i­net can use its pow­er to ap­prove the pur­chase of the 49 per cent stake–as well as its pow­er to ap­prove the two new 700 MHz li­cences–as lever­age in its ne­go­ti­a­tions with CWC over the fu­ture shape of mo­bile tele­pho­ny in T&T.Dig­i­cel, no doubt, would like a seat at that par­tic­u­lar ta­ble.

Will they get it?