Ok, so on Friday March 11, the news of Digicel's takeover of Claro Jamaica's assets, sent tongues wagging in Jamaica, as to the possible implications for the local telecommunications industry.
The takeover was a result of an asset swap between Digicel's owner - Denis O'Brien and América Móvil's owner - Carlos Slim Helu. [América Móvil - the largest mobile telecommunications company (telco) in Latin America, is Claro's parent company. Digicel is the largest mobile telco in the Caribbean.
So, Digicel gave up the assets of Digicel El Salvador and Digicel Honduras to América Móvil, in exchange for Claro Jamaica's assets].
The deal is to be cemented in June.
...Sounds good, so far, no?
3 days later: Phillip Paulwell, Opposition Spokesman on Information Communication Technology and former Minister of Commerce, Science and Technology, who was instrumental in liberalising the Jamaican telecommunications market in 2000, warns of possible monopolistic pricing by Digicel, if the deal is allowed to go through.
5-8 days later: LIME (formerly Cable & Wireless Jmaiaca - the first telco to introduce cellular phone technology to Jamaica), expresses concern re the uncompetitive nature of the deal.
They go as far as to urge the Fair Trading Commission (FTC), and Jamaican government, via the Office of Utilities Regulation (OUR), to reconsider the deal in light of the possible contraction of competition in the Jamaican telecommucaitions (telecoms) market, that would occur, if it went through.
Yesterday: UAWU 3rd Vice President - Garfield Harvey, warns of possible worker contraction if the deal is successful. (UAWU is the University and Allied Workers Union - whose members are mostly technical specialists and managers).
(The fear is that Claro Jamaica employees could lose their jobs if Claro Jamaica is absorbed into Digicel's organizational structure.
Well, last week, the news media reported that this would most likely be the result of the asset swap, whilst reporting that it was very unlikely that Digicel Jamaica employees would lose their jobs).
Now, what does this all of this mean for Claro Jamaica customers who were used to very reasonable data and voice plans from Claro?
Well, one of the following three (3) scenarios could occur:
The Government of Jamaica (via the OUR) and FTC get involved and block deal...as they worry that a newly-emerged Digicel that now has 2.65 million customers (versus the original 2.1 million by Digicel alone), will allow Digicel to fix telecoms prices, so that interconnection with LIME becomes impossible at reasonable rates.
(Interconnection involves connection of one network to that of another. Claro Jamaica purportedly has about 550,000 (550K) customers, which is growing due to their very reasonable voice and data plans and low interconnection charges to LIME.
Well, according to article,"Digicel Acquires Claro Jamaica", Claro Jamaica has grown by 150K customers. I know that at around December 2009, they meandered around 400,000 customers, so them growing by 150K customers, since then, puts them at 550K customers.
...they have grown as a result of Claro's consistent promotions since 2010 and their very reasonable voice and data plans; interconnection rates).
The Government of Jamaica allows the deal to go through, but under the condition that interconnection rates with LIME and any other market player/entrant, allow for fair competition in marketplace.
The Government of Jamaica allows the deal to go through with no or very limited conditions. (After all, they need the tax monies to be earned from the deal. The deal will result in positive net assets for Digicel).
As a result, Digicel would insist that LIME customers pay high interconnection charges to the Digicel network.
LIME's 700,000 customers shudder at paying these increased rates to Digicel (who now have 2.65 million customers) and so would eventually switch to Digicel to eliminate these charges altogether - which means the end of LIME Mobile, as we know it.
So Which Scenario is Most Likely?
Well it's very likely that scenario 2 will happen and I'll tell you why:
If the Jamaican government blocks the asset swap deal (scenario 1), it will seem to be interfering in a marketplace that it's predecessor (the People's National Party, when they were in government), worked hard to liberalize in 2000.
Telling a company that it can't swap assets with another, or takeover another company's assets when both are amicable to the deal, in a liberalized market, amounts to interference -interference that could have legal implications and could also be legally argued all the way to the World Trade Organization(WTO), if Digicel and América Móvil were to be so inclined.
The Jamaica Labour Party (JLP) government would also develop a reputation for interference, which wouldn't go down well:
a) In the Jamaican or the Caribbean telecoms industry, seeing that Jamaica provided the benchmark for telecommunications liberalization in other Caribbean territories.
b) With the International Monetary Fund (whose monies are helping to stabilize the Jamaican economy)- they are all for fair trade and liberalised markets, especially when it involves their most powerful members...a few of whom are no doubt eying the happenings here, with great interest.
If scenario 3 occurred, then LIME would have no other choice but to exit the mobile cellular market in Jamaica:
With Digicel's newly-formed 2.65 million customer base and high interconnection charges...LIME customers would weigh the cost vs benefits of interconnecting to Digicel and realize that they would be losing money by staying with LIME and hence switch.
This would make Digicel a virtual monopoly. (If you're tempted to believe that these two companies are the only possible formidable players in the mobile marketplace).
[If the latest statistics from budde.com.au is to believed, then Jamaica's mobile subscribers as of March 2011, is approximately 3.3 million.
(However, they did state that the data was based on what was available at the time of preparing the report (March 2011) and may not be for the current year. The data in the report, is based on reports from the International Telecommunications Union and Informa Telecoms & Media data ).
...So I believe that mobile subscribers/customers in Jamaica number around 3.5 million: 2.1 million to Digicel, 550,000 (550K) to Claro and 700,000 (700K) to LIME.
(As proof of LIME's figures: in February 2009, LIME had around 660K customers.
LIME, I assume, has grown somewhat, since the introduction of LIME Mobile TV in December 2010, but a lot of that growth has been reduced, due to customer defection to Claro and Digicel...sorry LIME, you still need more glue to keep your customers loyal, so I've put you at 700K, due to customer churn)].
If Digicel takes over Claro, Digicel would have 2.65/3.5 million = 76% of Jamaica's mobile customer base, versus its present 60% (from 2.1/3.5 million customers).
So the Jamaican government, in an effort to appear to be fair and being a facilitator of foreign direct investment in Jamaica, will take the middle-road (scenario 2).
[Oh, did I mention that Digicel - formerly Mossel (Jamaica) Ltd., is an Irish company?] :)
So the Jamaican government, via the OUR, will allow the deal to go through, but insist that certain conditions be met in facilitating fair competition in the Jamaican telecoms market.
So What's Next for Claro Jamaica Customers?
Whatever scenario plays out, Claro Jamaica customers remember that you have a voice - you are 550,000 strong. Digicel knows that if they hike prices on you, you will switch to LIME.
So if scenario 2 plays out like I think it will, there will be concessions made.
If Digicel refuses to listen to your pleas for reasonable telecoms charges...you'll know what to do.
Always use this as your bargaining chip when dealing with them.
If Digicel is the smart marketing company that I know they are, they will not want you, their newly-acquired Claro customers to defect. In the first few months, they will bend over backwards to keep you...
Play like the darling and flirt with them a little, knowing full well that they can hold you to 2-year and 3-year contracts...again use your bargaining chip with Digicel, the Jamaican government, the OUR and the FTC, so that no telecoms company in Jamaica can ever hold you at ransom.
Insist that Digicel give you the full terms and conditions of staying...read the fine print and bask in the knowledge that you can play both Digicel and LIME - meaning that you can get both of them to trip over themselves in catering to you.
After all, they want your money!..they should be forced to give you great customer service in return. :)
So, Claro Jamaica customers...use your bargaining chip, always!
...isn't it sweet when customers have increased bargaining power when united?
Nuff said (Jamaican, meaning, "enough has been said").
1) Nationwide Radio, March 11-21,2011
2) Power 106 FM, March 11-21,2011
3) IFC Projects- Summary of Project Sponsor Information: Mossel (Jamaica) Ltd., via International Finance Corporation, accessed March 21,2011
4) Central Intelligence Agency's "The World Factbook - Central America and the Caribbean:Jamaica", March 16,2011
5) Executive Summary of document, "Jamaica -Telecoms, Mobile, Broadband", by Lawrence Baker, via Budde.com.au, March 2011
6) Article, "Digicel acquires Claro Jamaica", by Al Edwards, JamaicaObserver.com, March 12, 2011
7) Article, "$Multimillion mobile ad wars" by Mark Titus, JamaicaGleaner.com, February 9,2009.