Brimming with expectation? What Liberty Global could mean to the Caribbean

The sale of Cable & Wireless to Liberty Global has been completed. As the region waits to see what impact this new firm will have, here we share a few of our thoughts on that subject.


Early in the week of 16 May, Liberty Global plc completed its acquisition of Cable & Wireless plc (CWC) in a transaction valued at approximately USD 7.4 billion (Source:
Liberty Global), which likely is the largest transaction of its kind in the Caribbean/Caribbean Community (CARICOM) region. Accordingly, there is much anticipation – mixed with some trepidation – of what this new era could mean for the region, the individual countries involved, and consumers.

As stated in Early thoughts: proposed takeover of Cable & Wireless by Liberty Global, Liberty Global is an unknown quantity in the region. Although the firm has been in existence since 2005, in the Caribbean it has only had a presence in Puerto Rico. Outside of the region, it is well known for cable television, a segment that tends not to have the stringent oversight experienced by traditional regulated telecoms services, such as fixed-line voice and mobile/cellular communications, which are critical markets in the CWC acquisitions.

A breath of fresh air…?

CWC’s history in the Caribbean has been long – over 150 years – and over the past 20 to 25 years, increasingly tense, and at times acrimonious. Although the firm stepped up its game to compete with Digicel in the mobile/cellular communications market, the fixed-line telephony, and to a lesser degree the Internet service, were neglected. Complaints about the firm’s service, such as being unresponsive to customer needs and the protracted process for resolution of issues, to name a few, are rife across the region.

Could a new player, with no real history in the Caribbean to speak of, but hopefully a different playbook from its predecessor, be the ticket? That is what people, from the average Joe to consumer interest groups and policymakers, across the region are hoping.

Diminished competition, diminished growth?

With the sale last year of Columbus International Inc., which had operated the popular brand, Flow, in the region to Cable & Wireless plc, in some countries where both firms had a presence, they have merged into a single operation. As a result, and for certain services, either a monopoly or a duopoly now exists. Unfortunately, due to the relatively small population sizes of most Caribbean countries, and their relatively mature telecoms markets, generally the region be seen as a hotbed for new, greenfield, infrastructure telecoms/ICT investment.

However, Liberty Global’s Chief Executive Officer, Mark Fries, is of the view that there is still considerable potential for telecoms and ICT to develop in the region:

This is a big moment for us and I couldn’t be more excited about the potential of LiLAC and CWC together. We are joining two high-growth businesses in a region that is both underpenetrated and underserved in broadband, mobile data and pay TV services. By combining our operations, we are creating a unique and well-diversified Latin America and Caribbean investment vehicle, which we believe will enhance long-term equity value for our shareholders.

(Source:  Liberty Global)

For players that already have a presence in the region, and cognisant of the growing trend for them to become “multi-play” service providers, there may be considerable room for transformation and growth. Further, as Caribbean countries continue the transition to digital societies, a broad range of opportunities for value-added and enhanced services may also emerge. It is thus the firms that are not flat-footed that may be in a position to capitalise on the ways in which Caribbean countries, and the region as a whole, is evolving.

The Digicel factor

Another company that has already begun to re-position itself as a multi-play (quad-play) service provider, is Digicel. As was reported in Snapshot: 2016 update of Internet speeds and pricing across the Caribbean, Digicel recently launched Digicel Play, through which it offers voice telephony, subscriber television and broadband Internet. At the time of writing, Digicel Play was available in six Caribbean countries, with plans to roll out in other countries.

Currently, Digicel is still a privately-held company; hence detailed insight into its plans and strategies is not publicly available. However, noting the competitive forces at play in the mobile/cellular market, the upsurge in the demand for mobile data services, recent acquisitions Digicel has made, such as submarine cable networks, and subscriber television firms, and its failed foray to list on the New York Stock Exchange, to name a few, they all point to a crucial transformation that is occurring within that firm.

Further, as a major player in the region’s mobile/cellular space, Digicel is well-positioned to compete directly with Liberty Global. Not only might it snatch market share from the incumbent, but it could also create customers in geographic areas CWC and/or Flow had not served (or had not served well). It is thus likely that the aggressive strategies Digicel has been employing from its inception in 2001, to now being in 31 markets worldwide, are likely to hold it in good stead, as it continues along the current path.

In summary, and at this juncture, there may still be cause to be optimistic that Liberty Global’s takeover of CWC will usher in positive changes in the Caribbean. Although some of the changes may be due to the change in leadership and strategic direction that should eventuate, consumer expectations with respect to telecoms and ICT in the region are also evolving. At the very least, services providers, including Liberty Global, should be responsive to those expectations – especially if we are vocal enough – which could drive (some of) the changes we envisage.

 

Image credit:  Logok

__________________