My Thoughts on Technology and Jamaica: Digicel finally acquires CLARO Jamaica with conditions – Carlos Slim’s Trojan Horse

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Thursday, September 1, 2011

Digicel finally acquires CLARO Jamaica with conditions – Carlos Slim’s Trojan Horse

Put your trust in God, my boys, and keep your powder dry

Oliver Cromwell before a Battle

The swap of Telecom Operations between Digicel Group and America Movil that shook the Telecoms World like the Japanese Earthquake did Japan on Friday March 11th 2011 as stated in my blog article entitled “Digicel buys CLARO Jamaica - Jumanji Exchange is no Robbery” appears to be coming to a close.

Telecom Provider LIME had nothing to fear as the OUR (Office of Utilities Regulation) and the FTC (Fair Trading Commission) who began investigations as far back as March 2011AD in the article “LIME wants OUR, FTC to assess Digicel Claro Deal”, published Sunday, March 20, 2011, The Jamaica Observer have now approved the transactions – with conditions this Wednesday August 31st, 2011AD.

This as the debt and Equity swap of CLARO Jamaica assets for Digicel El- Salvador and Digicel Honduras operations is near completion as stated in the article “Ja leg of 3-country Digicel/Claro deal approved”, published Wednesday, August 31, 2011, The Jamaica Observer and the article “Digicel-Claro deal approved with limits attached”, Published Wednesday August 31, 2011, The Jamaica Gleaner. The Debt part is that Telecom Provider Digicel is reportedly to receive US$350 million to make up the value difference between CLARO Jamaica assets on one hand and Digicel El- Salvador and Digicel Honduras on the other.

Prime Minister of Jamaica Bruce Golding has just recently announced on Wednesday August 31st, 2011AD that the CLARO Jamaica acquisition on the Jamaican end has been completed in Parliament, noting that, quote: “Digicel will therefore be required to maintain a separate network and complete a separate build-out of 90 per cent penetration of the island as required under the original Claro licences. Fulfillment of these obligations will be vigorously monitored and enforced. I have approved the acquisition of Claro by Digicel and the assignment of relevant licences without any modification to the licences and the obligations contained therein. This means that Digicel will be required to fulfill all of the obligations contained in the Claro licences with regard to the type of facility and specified service that must be provided, its interconnection obligations, licence limitations and network expansion obligations”.

In essence, the deal is now completed officially on August 31st 2011AD, nearly five (5) months from when the News official broke and two (2) months later than previous anticipated. However, it is not over yet, is based on an official company statement by Head of Group Public Relations Antonia Graham, quote: “Digicel is still waiting on regulatory and Government approval in El Salvador and Honduras for the sale of its operations there to Claro. Until such time as the necessary approvals are obtained in all three countries and the proposed transaction closes, both businesses - Digicel and Claro - will continue to operate independently.”

Put simply, Telecom Provider Digicel, even after the completion of the transactions for Digicel El- Salvador and Digicel Honduras, has to fulfill the obligations of the license for CLARO Jamaica. Merging the networks into one entity is not possible, as legally America Movil’s Bilateral Trade Agreement with Jamaica that allowed them entry into Jamaica are still binding in their Telecom Licenses for T1 and Frequency spectrum.

Thus albeit the CLARO brand name will disappear from Jamaica, its five hundred and seventeen thousand (517,000) subscribers are still to be treated as if CLARO never left Jamaica i.e. no services will change, be they CLAROUniverse, CLARO OMG and the Free-Calling offers.

Marketing people thus will get to keep their jobs, as they now have to come up with new marketing campaigns for the other Digicel Network, especially as the five hundred and seventeen thousand (517,000) subscribers show no signs of switching to the more expensive Telecom Provider Digicel as stated in my blog article entitled CLARO responds - You couldn't pay us to Switch”!

And amusingly, contrary to my prognostications as stated in my blog article entitled “Digicel buys CLARO Jamaica - Jumanji Exchange is no Robbery”, the Customer Care staff may not lose their jobs, as if the Prime Minister Bruce Golding’s Parliamentary utterances are to be adhered to, layoffs are out of the question.

This as these employees are “assets” included in the swap valuation and are effectively part of the Agreement between the Government of Jamaica and America Movil and are assets under the swap agreement between Digicel Group and America Movil and thus cannot be laid off due to rationalization as there is no rationalization just an annexing of the two Networks under one Brand name!

Thus even after the dust fully settles, it is STILL business as usual, only under a common brand; nobody loses their jobs due to the swap, especially the Marketing folk, who can continue their Marketing campaigns, only under the Digicel Brand – and their Budget! Most certainly, it is an Election Year, but the rational, both logically and legally, is sound!!

Plus, all ongoing contractual obligations must be adhered to and the build-out has to proceed as was before when CLARO Jamaica was Mexican owned. This means CLARO’s LTE (Long Term Evolution) Network is STILL slated for completion, despite the swap!

Much an in any company buy-out, any outstanding business obligations such as services offered or debts to be paid to creditors of the previous business owner have to be fulfilled by the new owners of the company. This is straightforward and simple and cannot be argued out of, no matter what Digicel’s lawyers may be planning once the purchase is complete.

Besides, with US$350 million in cash from America Movil, Telecom Provider Digicel can continue the build-out of the separate Network (which is experimental by the way!!) as well as building out their US$85 million Caribbean wide HSDPA+ Release 7 Network as stated in my blog article entitled “Digicel's US$85 million HSDPA+ and WiMax 4G Upgrade - Wizards of Waverly Place Fast Five Showdown” and the article “Of ATC Strikes and Digicel 3G+ Upgrades - Pushing Tin in Eerie, Indiana”.

Just in time for the US and EU tourists to arrive as stated in my blog article entitled “LIME and American Tourist Data Avalanche - The US$80 Million Dollar CannonBall Run”. Simple and Direct to understand; no need for a Talk show to argue about!

Best of all, everyone leaves the bargaining table happy, as Carlos Slim has gotten rid of Telecom Provider Digicel out of his territories by effectively forcing Telecom Provider Digicel to make him an offer, as despite their diminutive size, CLARO Jamaica was reducing Telecom Provider Digicel Voice Calling APRU, their main bread-and-butter before they had launched their Digicel 4G Broadband Service as evidenced from CLAROOMG as described in my blog article entitled “Telecom Provider LIME and M2M Services - Free SMS and EDGE for the Caribbean to Foster Regional Integration”.

I am only saddened that the other ruling by the FTC that would have ushered in Flat-Rate Calling and MNP (Mobile Number Portability) as prognosticated in my blog article entitled “CLARO vs Digicel - Cross-Network Flat Rate Calling and MNP Cometh” were not made conditional under the swap.

This despite the FTC’s argument being based on Section 30 and 33 of the Telecommunications Act of 2000 as stated in the article “Digicel loses appeal, call rates could fall”, published Wednesday, June 02, 2010, The Jamaica Observer, based on the 2004AD ruling by the OUR that all Telecom Providers can be seen as dominant, a ruling pending for implementation on Telecom Providers Digicel.

Section 30 of the Telecommunications Act of 2000 declares all Telecom Providers are declared dominant and pricing discrimination against the other dominant Telecom Provider with which they are competing is unlawful, as cross connection between themselves [Telecom Providers] must be provided in a manner that is fair, transparent and based on the cost of provisioning the service only, not on negotiated interconnection rates. Section 33 of the Telecommunications Act of 2000 further goes on to give the power that the OUR has in setting cross network rates under the guidance of Section 30 of the Telecommunications Act of 2000. This as argued in my blog article entitled “CLARO and MNP - Happy Birthday and no more Stones and snakes

Curiously Telecom Provider Digicel has offered to reduce the cross-network calling rates as follows:

1.     Peak rate from JA$17.70 to JA$14.70 a decrease of JA$3.00
2.     Off Peak Rate from JA$15.80 to JA$13.80, a decrease of JA$2.00

This may be an indication of that joint OUR and FTC ruling based on the Telecommunications Act of 2000 that presents an opportunity that the Government of Jamaica is sure to pounce on now that this purchase is soon to be finalized – and of which Telecom Provider Digicel is aware is coming.

With a new Telecommunications Act and Telecom Regulator on the way possibly within the Fourth Quarter of 2011AD as stated in my blog article entitled “Telecom Providers get their own Regulator - GOJ says Telecoms For Your Eyes Only” and my Geezam Blog article entitled “New Telecom Act Coming for Jamaica – Providers surprised with their Own Regulator”, these finally parts of the puzzle [MNP, MRSI, Flat-Rate Calling] may be enforceable on Telecom Providers in Jamaica to the benefit of Jamaicans as a whole as it relates to the cost of Cross-Network Calling and the cost of Mobile Handsets.

But until then Carlos Slim, Chairman of America Movil, thanks to using my suggestion from April 2009AD while speaking to a bunch of brain-dead Shurpower Generator Engineers and filmed via hidden audio-visual device, has left Telecom Provider Digicel with a Trojan Horse that is sure to maintain competition and bring regulatory changes to the Telecoms Sector  in Jamaica! So Telecom Provider LIME has little to worry about, only to stick to their long term plans as stated in my blog article entitled “LIME look to the future with new Services - Video and Audio Friends with Benefits in the Dead Zone”.

It may also set the stage for a lucky FDI (Foreign Direct Investor) willing to take the CLARO Jamaica assets off Telecom Provider Digicel’s hands at a later date!
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