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THE ISSUE: Jury still out on merger

rhondathompson, [email protected]

THE ISSUE: Jury still  out on merger

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What are the implications of the Fair Trading Commission’s conditional approval of the LIME and Flow merger?

It will definitely not be business as usual in Barbados’ telecommunications sector from now on. This is the expected outcome now that the Fair Trading Commission (FTC) has given its conditional blessing to the merger of Cable & Wireless Communications PLC (CWC) and Columbus International Inc.

However, exactly how things will unfold as the two operations are integrated over the next year, and the response that will come from chief regional competitor Digicel, remains unclear.

The pending amalgamation received the FTC’s conditional approval in a decision dated March 27, 2015, which was communicated by its chief executive officer (CEO) Peggy Griffith.

It followed three months of deliberations after a formal application was submitted by CWC and Columbus, which trade as LIME and Flow respectively, and in reaching its decision the regulator would have considered submissions from other market actors.

The regulator said that in completing its analysis and reaching a decision on the merger, it had “considered the overall efficiencies of the merger and the anti-competitive effects which the merger will create in the fixed-voice (landline) telephone and fixed data (broadband Internet) services and has determined that the merger should be approved”.

14 conditions

This, however, was subject to 14 “conditions”, the most prominent being the instruction that overlapping fibre cable networks servicing thousands of Barbadian customers, had to be sold to a company other than those currently operating in the market. It was part of the FTC’s effort to ensure the market for broadband services was competitive.

The FTC also said that it would “appoint a trustee(s) . . . who will be responsible for monitoring the ongoing management of the divested assets”, which “will ensure that the divested assets are maintained intact and made available for sale”.

If CWC and Columbus do not find “a suitable buyer” for the mentioned assets within 180 days of the merger decision, the trustee(s) would be responsible for that task.

Other conditions related to commercial agreements giving access to the merged entity’s infrastructure, including poles, ducts and facilities, and that the combined company had to be “technically ready” for fixed line and mobile network number portability by the end of September and November, respectively.

Same prices

Also the FTC mandated that within three months of the date of the merger being effected the CWC/Columbus company “must offer the same prices, products and service standards to customers in areas not passed by a competing fixed voice network as those offered to customers in areas passed by a competing fixed voice network”, and “must adhere to its commitment that all current LIME and Flow broadband and television tariffs will be set at whichever level is the lower of the tariffs offered by the two companies”.

Reacting to the FTC announcement, CWC CEO Phil Bentley said his company had completed its US$1.85 billion acquisition of Columbus and that having received regulatory for the merger in Barbados, the company would be advancing the integration process.

“Most of the markets we operate in have approved our integration plans and therefore . . .we can start to release some of the US$1.5 billion investment monies we have set aside to provide our customers with unrivalled telecommunications experience.”

Digicel welcomes decision

On the other hand, Digicel welcomed the FTC’s merger conditions. Its Barbados CEO Mark Linehan said the company wanted to “meet soon with the FTC to get full details”.

Linehan said Digicel was committed to Barbados, had invested a lot of money here, and intended to continue doing so as it looked for growth opportunities.

He was also quoted as saying that the FTC’s instruction that some of the CWC/Columbus Barbados fibre infrastructure had to be sold was key to the process.

“We pretty much broadly welcome the decision because it confirms that significant divestment of assets must occur in order to mitigate any anti-competitiveness effects of such a merger and we welcome that,” he said.

In his initial comments on the matter, Malcolm Gibbs-Taitt of the Barbados Consumer Research Organisation said he was disappointed because he could not see how merging two similar companies could maintain fair competition.

He also pointed out that the FTC decision could be challenged since it operated similar to a court, while adding that the decision was “not so straightforward that I can say it is good or it is bad”.

So that in totality it is too early to decisively state what the full implications of the pending merger will be.