Digicel to shut down Claro network

13 Jan 2012

Digicel Jamaica has announced that it will shut down Claro’s cellular network on 1 March 2012, following the removal of conditions on its acquisition of the Amercia Movil (AM) subsidiary. The cellco will began inviting customers to migrate to its own network from next week, with former Claro customers able to retain their current phone numbers. Digicel Group acquired Claro Jamaica in November 2011 as part of a deal that saw Digicel swap its Honduran and El Salvadoran operations for AM’s Jamaican wireless arm. Former Prime Minister Bruce Golding approved the merger in early September, with the condition that the combined company operate and maintain both networks, including a build-out to meet the 90% coverage requirement of Claro’s concession. However, Andrew Holness, who succeeded Holding as PM in October last year, before being defeated in December’s election, acquiesced to an appeal from Digicel and overturned his predecessor’s decision. Holness said that it was better to have a managed merger of the two companies than risk job losses through the deal collapsing.

Since its approval, the deal has been widely criticised and challenged in the courts. Digicel’s remaining competitor, UK-based LIME was unsuccessful in its attempt to have the decision overturned in late September. Jamaica’s Fair Trade Commission (FTC) also filed a lawsuit in January to block the deal, but has so far failed to bring Claro or Digicel to court. Most recently, a second watchdog has weighed in on the matter; the Office of Utilities Regulation (OUR) is reportedly seeking consultation with Digicel in order to determine a course of action regarding an influx of complaints from Claro customers unable to connect to the network. The regulator has also contacted the PM’s office for further details as ‘the OUR has not been privy to the mechanisms governing the new arrangements’.

Newly appointed ICT minister Phillip Paulwell had been consulted by Holness prior to his decision to remove the conditions on the merger, and agreed that operating two networks was an unworkable option. However, Paulwell has acknowledged the danger that the merger poses to maintaining a competitive environment in the sector and is reviewing legislation proposed by the previous government to encourage competition, including measures such as decreasing mobile termination rates (MTRs). Once completed, the combined entity will dominate the segment, controlling approximately 77% of Jamaica’s wireless market, whilst LIME will represent the remaining 23%.