For Caribbean business, telecoms is the biggest missed opportunity since independence.Irish-owned Digicel started operations in Jamaica in 2001. It pulled a trick most Caribbean companies only talk about. It used Caricom as a springboard to the French and Dutch-speaking Caribbean, Central America and beyond that, the broad Pacific.Digicel has sales revenues not so far short of US$3 billion, and profits to match. Why couldn't a Caribbean outfit get there first?
Twenty years ago, I ran a story on telecoms liberalisation. At that point, Neal and Massy were keen to invest, big-time, so were other Caribbean businesses.Back then, Cable & Wireless held firm monopoly rights in most islands, alongside a 49 per cent stake in TSTT, entry effectively blocked.
Since then, what went right? With Digicel, cellular moved from monopoly to duopoly. Flow's parent Columbus Communications moved from cable to triple-play. Those two are far from perfect, but they brought competition. And there has been strong investment in submarine fibre optics.
And what went wrong? Regulators were painfully slow to open up. T&T was among the slowest, with Digicel launched here only in 2006. Competition came 20 years too late. A single well-connected local player, Laqtel, scrambled a licence but could not get off the starting block.
Now, we're on the edge of the next set of new technology. We'll be seeing roll-outs of fibre to the home, we'll be seeing interactive Internet Protocol TV. If the regulators move, we'll be seeing number portability and local loop unbundling, allowing increased competition.
Meanwhile, Cable and Wireless Communications (CWC) wants to buy Columbus. In most Caricom islands, that would leave a duopoly in cellular and a single dominant player in the rest of the market. T&T would be an oddity, with CWC owning Flow, alongside a 49 per cent stake in TSTT. Empire strikes back? Not quite. For starters, CWC is a pale shadow of the former Cable & Wireless.
Privatised by Margaret Thatcher in the 1980s, Cable & Wireless then used its scattered operations in former British colonies as a springboard. Its UK arm, Mercury, challenged the incumbent British Telecom. There were affiliates in Australia, Japan, the US...the list goes on.Cable & Wireless press releases referred to the company as "the telecommunications giant." Its slogan "We are our own strategic partner" was overstretched, but not pure fantasy.
The company was slow to invest. Cellular was seen as a niche market. Internationally, the network never really glued. The stock market valuation of Hong Kong Telecom was greater than the whole C&W caboodle.
C&W sold assets to unlock shareholder value. Hong Kong went in 2000. In 2010, after a shareholder rebellion over high executive pay, the remaining properties were split. Cable & Wireless Worldwide took the UK and most other affiliates. Its share price plummeted; the company was snapped up by Vodafone in 2012.
A scatter of island operations became Cable & Wireless Communications. The sell-down continued; Channel Islands; Isle of Man; Maldives; then last year, Monaco and Macao. Meanwhile, CWC in 2011 bought a 51 per cent stake in Bahamas Telecommunications.
That produced a geographically concentrated core in the Caribbean and Panama, albeit registered in London and managed from Florida. If regulators allow the Columbus deal, it would put CWC "back on the map." It won't be a world player, but it could be a tempting pick-up for a buyer from North America, Mexico, Europe, or indeed China.
So where does that leave TSTT? If the deal goes through and nothing else changes, the old incumbent would be shadow-boxing with its 49 per cent shareholder, to nobody's benefit.A full merger of TSTT with the expanded CWC would transform the locally-held 51 per cent to a smallish minority holding–a back-seat passenger for good or ill in someone's regional private jet.
It would leave the local telecoms market with one dominant player. And it would leave the Government with a clear conflict of interest. Should it uphold competition? Or foster monopoly profits to benefit the Treasury?
The obvious answer would be for the new CWC to hold on to Flow, but divest its 49 per cent stake in TSTT. That would leave the competitive state of play as it now stands–and indeed intensifying, with a third cellular licence to be awarded, alongside new spectrum, number portability and loop unbundling.
Divest, but who to? The obvious answer would be, to a new international strategic partner–or indeed to a local one, if there are takers. Alternatively, there could be a stock market offering, with multiple buyers; at a management level, that would leave the existing team as the driving force.
In principle, the Government could buy back the 49 per cent it sold a quarter-century ago. If, that is, the Government has the cash to spare. But fully state-owned telecoms is out of style, for many reasons.
Indeed, it's not immediately clear that the Government (rather, NEL) should even retain its existing 51 per cent. Government control does not sit well with fair competition; aside from access to preferential borrowing rates, there's the shadow of preferential treatment when major decisions are in play. All eyes are on the regulators.