The War Has Ended (Digicel vs. Claro)

On March 11th, the tables turned in the telcom industry when America Móvil (AMX) announced that they have entered into an agreement with Digicel to sell its local operations (Claro) to them while they take over Digicel's operations in Honduras and El Salvador. The feud between Carlos Slim Helú (owner of AMX and the richest man in the world) and Dennis O’Brien (owner of Digicel) finally seems to be winding down. In case you didn’t know, Claro dived into the Jamaican market in 2008 as a result of Digicel invading AMX’s Central American territories. By 2009, Claro Jamaica secured its place as Digicel’s main rival by making a big splash in the market with their catchy advertisements, aggressive promotions and competitive rates but this was not enough for them to cruise along comfortably. 

So…What does this merger mean?

It means that Digicel will truly be the bigger, better network. Digicel will be able to increase their dominance in the market where they already have 2.1 million subscribers out of a population of 2.8 million. With a major player dropping out of the game and Jamaica's other operator, LIME, holding nearly less than 20% market share, a monopoly could be a genuine threat. Automatically people start worrying about all the drawbacks of a monopoly, the exploitation of consumers, restricted choices, inefficacy due to lack of competition and of course, price increases.

However, my concerns are currently more focused on what Digicel meant in this statement: “It demonstrates our further investment in and commitment to Jamaica and will enable us to further enhance our offerings to our enlarged customer base following the acquisition of Claro.” What exactly are these offers that they plan to enhance? Digicel has their Blackberry market locked so the possibilities are extraordinary as they acquire the exclusivity that Claro holds for iPhones. A Digicel iPhone data plan would be a dream come true to many and also a well needed metamorphosis for Blackberry nation. While I’m on my train of wishful thinking, maybe more attention will be placed on the iPad, maybe EDGE will get an upgrade to 3G and in time, to LTE (Mobile 4G).

With the terms of the transaction yet to be disclosed, I don’t think we should instantly fight out the change like many are doing. What do you think? Is this deal a guaranteed loss for Jamaica or could it be a chance for both Digicel and LIME to step up?