Wednesday, March 30, 2011

Jamaica - O'Brien's Digicel is to acquire the Claro network of Carlos Slim

[ict pulse] On March 11, it was announced that Digicel had purchased Claro, the third mobile operator in Jamaica. The transaction will effectively reduce the number of mobile operators from three to two.

The extent to which competition in the mobile market will be affected by the purchase is expected to be the most crucial consideration of the regulatory review process. In any market where fair competition is desired, it is important that no one player controls the market or is unaffected by the actions of its competitors or of consumers. Currently, Digicel is reported to have the largest share of the mobile/cellular market in Jamaica. Although Claro had the smallest market share of the three operators, Digicel’s market share will undoubtedly increase thanks to the acquisition. Hence the regulators should consider the impact of this change with regard to (among other things):

- the extent to which Digicel’s market power will change
- how the market concentration will change
- the possible effects of the purchase on other operators in the market and on competition in general.

Secondly, one of the primary objectives of competition and regulation is to realise benefits to consumers. Competition is generally expected to drive down rates, and to improve access to and the availability of a broad range of telecoms services. Hence another matter that must be considered is whether or not, or the extent to which, the acquisition is in the long-term interest of end-users.
Further, the regulators should attempt to determine whether competition in the mobile market will be substantially lessened if the purchase were approved. Digicel’s acquisition of Claro will decrease the number of players on the market from three to two.

Finally, there has been a history of rivalry between the two mobile operators from which consumers have benefitted, but that will no longer obtain. The regulators will need to examine these and other markers of competition to better inform their decisions and recommendations.

Is the Claro sale to Digicel good for competition in Jamaica?

No comments: