My Thoughts on Technology and Jamaica: Digicel and America Movil complete Telecoms Swap - Telecom Regulators to get their Pound of Flesh


Monday, December 5, 2011

Digicel and America Movil complete Telecoms Swap - Telecom Regulators to get their Pound of Flesh

Nine (9) months of suspense has finally ended. The swap that was initiated on Friday March 11th 2011AD between Digicel Group and America Movil that shook the Telecoms World like the Japanese Earthquake as stated in my blog article entitled “Digicel buys CLARO Jamaica - Jumanji Exchange is no Robbery” has final been resolved.

On that day there was an earthquake and Tsunami in Japan as faithfully recorded in my Geezam Blog article entitled Japan Nuclear Reactor Meltdown is the Asian Tiger Chernobyl and the article “Japan Nuclear Disaster - Implications for Jamaica and the Consumer Electronics World”. The day was also memorable for the launch of the A5 Dual-Core Apple iPad 2, also recorded in  my Geezam Blog article entitled “Apple iPad 2 - Dual-Core Easy Skankin'”.

Interesting coincidences indeed!!

For those of my faithful fans who love reading newspaper articles, this one is worth printing out and framing, as it is history in the making as per the article “Digicel acquires América Movil's operations in Jamaica and sells its operations in Honduras”, published Friday, December 02, 2011, The Jamaica Observer. So at long last it is over.......or are the problems for the Telecom Providers involved in the combination Debt and Equity swap just beginning to see their troubles multiply?

I say this as during the long nine (9) months of horse trading, lots of acrimonious words have been traded, ironically by Politicians and GOJ (Government of Jamaica) policymakers, making that which is a simple swap of assets that are not equally matched in value a complex affair. It also helps to prove that it is possible to do such a swap, thus disproving what I was told when I was a Network Maintenance Technician working at C&W (2001 to 2004).

Most likely Digicel Honduras and Digicel El Salvador had a greater value than the incompletely built-out CLARO Jamaica asset, even if the insured employees were included in the valuation. Thus, the difference in cost may have been taken care of by giving Digicel Group preferential stock in and America Movil, stock and bonds possibly to the tune of US$250 million depending on who you believe. Preferential Stock and bonds that will be worth significantly more when the Stock Market open on Monday December 5th 2011AD

Even Telecom Provider LIME got in on the act, prodding the OUR (Office of Utilities Regulation) and the FTC (Fair Trading Commission) to 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.

And in the midst of it., the two (2) Telecoms Providers in question Digicel Group and America Movil have been awfully quiet with very little details let slip, mainly via the media.

Even the above article quoted on this most historic of deals has very terse words from the two (2) Telecom Providers involved. First America Movil's words after filing with the SEC (Security Exchange Commission) in the US, quote: “In March 2011, we entered into an agreement with Digicel Group Limited to acquire 100% of Digicel's operations in Honduras and El Salvador selling to them in the process our operation in Jamaica. The completion of the transaction is subject to governmental and regulatory approvals. The competition authority in El Salvador has imposed conditions on the transaction, and we are evaluating our options and the timing of any possible closing.”

Similar words emanated from Digicel Group CEO Colm Delves, quote: “We are pleased to have completed the acquisition of Claro Jamaica. Our immediate focus now will be to get a fuller understanding of the business and in this regard we have deployed several teams who are collating appropriate information. We will keep the Claro customer base, employees, dealers and suppliers advised of our plans over the course of the next few weeks.”.

That's it.

No statements of fact, only sparse comments on the swap of Telecom Operations of CLARO Jamaica and Digicel El Salvador and Digicel Honduras. Effectively I am back to speculating about the future as per my blog article entitledDigicel finally acquires CLARO Jamaica with conditions – Carlos Slim’s Trojan Horsein which I speculated that the acquisition left Digicel Group having to build out CLARO Jamaica's unfinished GSM (Global Systems Mobile) Voice and upgrade it along with their Network to HSDPA+ Release 7.

Thus it remains to be seen what will be the eventual outcome. One thin is for sure though, whatever form Digicel takes post-swap with America Movil, their expenses are sure to double. An eventuality for which they are already taking precautions by going Green as per my blog article entitled “Digicel adds on Green Power to future Corporate Building - Petula Clarke's Downtown Global Warming Crisis”.

A necessary precaution, as the Media reports the respective Government in each country taking advantage of the swap to impose conditions on the sale to prevent the formation of a monopoly. Here in Jamaica, it is the requirement that Digicel Group build out CLARO Network to the specification as per their Bilateral Trade Agreement to cover 90% of the island with Wireless Voice and Data Service as noted in my blog article entitled “Digicel finally acquires CLARO Jamaica with conditions – Carlos Slim’s Trojan Horse”.

The fact that the GOJ is also going to be making a Telecom Regulator separate and apart form the OUR (Office of Utilities Regulation) and update the ageing Telecommunications Act of 2000 also means further regulatory pressure being applied to the Telecoms Providers.

This is in order ensure a fair provision of service in terms of Cross Network Calling Rates and VAS (Value Added Services) such as MNP (Mobile Number Portability) and prevent the formation of monopolies as per my Geezam Blog article entitled “New Telecom Act Coming for Jamaica - Providers surprised with their Own Regulator”.

As details are not forthcoming as to the specifics of the deal, one can thus work with the conclusions drawn in my blog article entitled “Digicel finally acquires CLARO Jamaica with conditions – Carlos Slim’s Trojan Horse”. More on this in a few weeks when the Telecom Providers decide to get the local Jamaican as well as Mexican Media as to the exact details of the transaction, sure to be of interest to Finance as well as Engineering people.
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