Mark Lyn­der­say

On Thurs­day, Ca­ble and Wire­less Com­mu­ni­ca­tions (CWC) an­nounced that it would be buy­ing Colum­bus In­ter­na­tion­al (http://ow.ly/E1VDU), the quad­play, broad­band back­haul up­start that matched the chal­lenge to in­cum­bent TSTT that Dig­i­cel mount­ed in the mo­bile telecom­mu­ni­ca­tions space on the ground.

De­spite the kee­ness of Phil Bent­ley, CEO of Ca­ble and Wire­less Com­mu­ni­ca­tions, and Bren­dan Pad­dick, CEO and chair­man of Colum­bus Com­mu­ni­ca­tions, to char­ac­terise the deal as a big win for the cus­tomers of both com­pa­nies, the dri­ver of this deal is, ul­ti­mate­ly, prof­it.

For CWC, it's an op­por­tu­ni­ty to sub­stan­tial­ly change its fal­ter­ing po­si­tion as a tele­pho­ny ser­vices provider in re­gion­al mar­kets that are large­ly aban­don­ing its land­line prod­ucts and of­fer a resur­gent pres­ence as a quad­play gi­ant.

For Colum­bus, the prospects are far sim­pler. The buy­out puts US$707 mil­lion on the ta­ble for its founders and fills a gi­ant US$1.17 bil­lion hole in the com­pa­ny's cash reg­is­ters, in­stant­ly mon­etis­ing its mas­sive ca­ble in­fra­struc­ture build­outs over the last ten years.

It is not a done deal. Ac­cord­ing to the CWC state­ment on the ac­qui­si­tion (http://ow.ly/E0Qx7), the com­pa­ny notes un­der "Risk Fac­tors," that the buy­out is "con­di­tion­al up­on, among oth­er things, ap­proval from the US an­titrust au­thor­i­ties un­der the Hart-Scott-Rodi­no Act, and rel­e­vant au­thor­i­ties in Bar­ba­dos, Ja­maica and T&T." Reg­u­la­to­ry ap­provals are al­so re­quired from the gov­ern­ments of Bar­ba­dos, Ja­maica and T&T.

That these is­sues are lumped in with more prac­ti­cal mat­ters re­lat­ed to the in­te­gra­tion of tech­nolo­gies sug­gests that CWC con­sid­ers these to be de­tails, a no­tion ro­bust­ly sup­port­ed by the mat­ter-of-fact de­c­la­ra­tion of the ac­qui­si­tion.

While the ac­qui­si­tion makes clear busi­ness sense for both par­ties in­volved, there re­mains the mat­ter of every­one else in­volved in the re­gion­al tech­nol­o­gy dance.

Dig­i­cel, which has been on a bit of an ac­qui­si­tions binge it­self over the last two years, im­me­di­ate­ly is­sued a re­lease (http://ow.ly/E1Vyk) reg­is­ter­ing con­cern, noth­ing that the "pro­posed trans­ac­tion rais­es a con­sid­er­able num­ber of is­sues for telecom­mu­ni­ca­tions reg­u­la­tion and com­pe­ti­tion gen­er­al­ly in the re­gion."

Cen­tral to that is the col­lapse of the three-play­er mar­ket, which saw Dig­i­cel, CWC (a mi­nor­i­ty share­hold­er in TSTT lo­cal­ly) and Colum­bus jostling for cus­tomers in mar­kets in ag­gres­sive though quite healthy flux.

Of the three, the 143-year-old CWC, once the com­mu­ni­ca­tions hub of the British Em­pire,was the most mea­sured and care­ful force, al­low­ing Dig­i­cel to grab vast swaths of mo­bile mar­ket share in the Caribbean and di­min­ish­ing CWC's Lime brand to 16 per cent of the Ja­maican mar­ket in 2013.

In T&T, the busi­ness propo­si­tion is even more del­i­cate for CWC and TSTT. The gov­ern­ment owns a 51 per cent con­trol­ling share­hold­ing in the lo­cal telecom­mu­ni­ca­tions com­pa­ny through NEL, but the re­la­tion­ship be­tween CWC and TSTT has been com­bat­ive for years. CWC's Phil Bent­ley de­scribed TSTT as a "fail­ing en­ter­prise," in a May Busi­ness Guardian in­ter­view.

CWC would lat­er be an­nounced as one of the ap­pli­cants for a third mo­bile telecom­mu­ni­ca­tions li­cence for T&T.

"At the end of the day," Bent­ley told the BG, "this is a busi­ness. We in­vest mon­ey and hope to get a re­turn. If we can't get a re­turn, we will go some­where else. We have got lots of op­tions."

Those op­tions got ex­er­cised last week and TSTT is now in the cu­ri­ous po­si­tion of hav­ing a po­ten­tial com­peti­tor with de­tailed ac­cess to its five-year re­cov­ery plan on its board, not to men­tion know­ing every­thing it needs about its process and in­fra­struc­ture.

TSTT's board of di­rec­tors and man­age­ment, let by a chair­man with no dis­cernible telecom­mu­ni­ca­tions ex­pe­ri­ence, must now face a busi­ness chal­lenge of stag­ger­ing pro­por­tions.

In the face of that, even the fate of the em­ploy­ees who built Colum­bus in­to a force to be reck­oned with–and now look set to dis­ap­pear in­to the con­sid­er­able bu­reau­crat­ic maw of the CWC ma­chine–be­gins to pale.

Will the gov­ern­ment buy CWC's shares or bank on the Telecom­mu­ni­ca­tions Au­thor­i­ty (TATT) de­mand­ing the con­ver­sion of those shares in­to a non­vot­ing in­vest­ment a con­di­tion of its ap­provals? TSTT is un­like­ly, in its cur­rent state of in­cre­men­tal re­cov­ery, to find a ma­jor buy­er oth­er than the Gov­ern­ment ca­pa­ble of snap­ping up CWC's share­hold­ing and it's doubt­ful that the pub­lic would be will­ing to fi­nance an IPO on a scale that would cov­er it.

If CWC is grant­ed a mo­bile tele­pho­ny li­cense, would it even need a busi­ness part­ner­ship of any sort with TSTT?

In a busi­ness land­scape dom­i­nat­ed by Dig­i­cel and CWC and in most of the re­gion, a two-play­er mar­ket would be­come the norm.

Lo­cal­ly, what would TSTT's role con­ceiv­ably be? Is it des­tined to be­come an­oth­er Caribbean Air­lines; a qua­si-state agency fund­ed in­ter­minably on ro­man­tic no­tions in­stead of hard busi­ness prin­ci­ples?

Con­sol­i­da­tion is good for busi­ness. It lever­ages cost­ly in­stalled as­sets over a larg­er cus­tomer base, re­duces em­ploy­ee head count and dra­mat­i­cal­ly im­proves pro­cure­ment clout.

But it al­so sti­fles com­pe­ti­tion, cre­at­ing mono­liths that crush star­tups and re­duces cus­tomer choice.

TATT has al­ready made it clear that it wants three-way com­pe­ti­tion in the lo­cal telecom­mu­ni­ca­tions sec­tor. Now it must make sure that the play­ing field re­mains lev­el and fair in this new dis­pen­sa­tion.