Digicel retaliates to FTC lawsuit

9 Jan 2012

Digicel Jamaica’s head of legal and regulatory affairs, Richard Fraser, has responded to reports of a lawsuit from the nation’s Fair Trade Commission (FTC) regarding the company’s merger with Mexico-based Claro claiming that no legal challenge has yet been served on either company. In a letter to local newspaper Jamaica Observer, Fraser outlined the benefits that the merger will provide to consumers, and criticised the FTC for its attempt to ‘squeeze merger regulation through the back door, when it has admitted on numerous occasions that it has no power or statutory authority concerning the regulation of mergers and acquisitions’. The FTC has been aware of the companies’ plans since March 2011 and its failure to bring Claro or Digicel to court suggests, according to Fraser, that the commission is reconsidering its position, acknowledging that it is unlikely to win a case brought against the cellcos. As previously reported by CommsUpdate, the basis for the FTC’s challenge is that the merger will significantly reduce competition in the wireless market, and therefore harm end users. Jamaica’s third and smallest wireless provider by subscribers, UK-based LIME, in an unsuccessful legal challenge shortly after the merger was approved, made a similar case claiming that the prime minister had acted unlawfully, and to the detriment of the sector.

Faced with opposition from the competition regulator, and its sole rival, Digicel said that it ‘strenuously refute[s] any contention by the FTC or otherwise that consumer welfare will be negatively impacted as a result of the acquisition’. Rather, customers will benefit from lower rates; Digicel announced earlier this month that it would reduce cross-network tariffs by up to 20%. The company will invest a further USD30 million in the sector, reportedly to integrate the two networks and spectrum, though one of the conditions of the merger was that the networks would remain separate. The combined company will also drive innovation by rolling out a HSPA+ network with 80% coverage, previously planned by Claro allowing faster download speeds than the current HSDPA networks operated by LIME and previously by Claro.

If the FTC is unsuccessful in its bid to acquire an injunction, the acquisition will see the enlarged Digicel control approximately 77% of the market whilst its only remaining rival, LIME will control 23%.

Jamaica,America Movil Jamaica (Claro), Digicel (Jamaica), LIME Jamaica,

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