CALA region privatisation, nationalisation and liberalisation: variety is the watchword

Central America and the Caribbean: varied telecoms markets

When I wrote in late August about the quasi-nationalisation of Belize Telemedia, this was in response to being urged to do so by a Caribbean-based regular reader of this blog. That reader also suggested a number of other stories from his part of the world that I might dig into and discuss here. Alas, an extremely busy September prevented me from updating DTW as much as I ordinarily like to - and what I have written has tended to be on subjects about which it's been relatively easier to construct a discursive piece without significant research. To have done justice to any of the ideas suggested by my Caribbean correspondent would have required more thought and time than I can currently spare.

It is fortunate, then, that Tammy Parker of Informa Telecoms & Media, has rounded up some notable news items from around the Caribbean and Central America and built a useful article whose theme is an examination of very varied approaches to competition by governments in the region. I hope Ms. Parker's article, and my own reactions to it here, are of interest to this blog's most regular Caribbean-based reader and to others who visit this blog.

Parker starts with a mention of the situation in Belize, where Dean Barrow, the country's Prime Minister, has seized the 94% of the telco's shares that had been held by companies associated with British businessman and Conservative politician Michael Ashcroft. Parker reports the same twists and turns previously discussed here, but does not give space to the contention that Belize Telemedia is not actually under the control of Lord Ashcroft. That contention, some readers will recall, was made in statement from the Hayward Charitable Belize Fund posted here by an anonymous person, whom I assume to be either an employee of that Fund or of a PR firm working on its behalf.

The DevelopingTelecomsWatch article about the goings on in Belize concluded by considering the question of whether the seizure of Belize Telemedia shares would discourage pan-Caribbean mobile group Digicel (or some other likely foreign stategic telecoms sector investor) from taking an interest in the country. I wondered whether a buccaneering company such as Digicel might actually look more favourably at the Belize opportunity if it were quickly to become apparent that Mr. Barrow is earnestly trying to break a telecoms monopoly, i.e. rather than just trying to gain somehow from attacking the billionaire ally of his domestic political opponents.

Tammy Parker is not so sure. As she points out, the entire expropriation process, from initiation in the nation's legislature to the actual Government takeover, was amazingly swift, taking just two days. Parker also notes that new Belize Telemedia board members include Anwar Barrow, the son of the Prime Minister, and his mother, Lois Young, as Secretary. The Belizean Government, reports Parker, has said that it hopes the full nationalization of the company is temporary, since it would like to offer shares to other investors, to encourage investment and competition in the nation’s telecommunications market.

Parker feels, however, that potential investors will be wary of entering a country where the government "so wantonly takes command of a private business and places the prime minister's family members on the board, whether for seemingly good reasons or not." She also contends that the Government "still wants individual institutions and people to be limited to a stake in BTL of 25% or less, ensuring that none has majority control", arguing that "the ownership restriction is likely to turn off potential investors, keeping major regional players, such as America Movil, Cable & Wireless and Digicel, far from Belize's shores."

Tammy Parker then takes a look at Costa Rica, which she describes as "moving in a completely different direction by opening its long-closed telecommunications market to new entrants".

The country is apparently set to issue three mobile network licenses, probably in 2Q10, creating, for the first time, competition for the cellular business unit of incumbent monopolist telecoms operator and utilities firm ICE (Instituto Costarricense de Electricidad). As Parker notes, while ICE has excelled in building a basic landline service in Costa Rica (the nation’s fixed-line penetration exceeds that of much of Latin America), the national mobile sector is something of a laggard. According to WCIS, the mobile penetration rate across South America, Central America and the Caribbean stands at 84.45%. The figure for Costa Rica is just 57.29% - and this is not one of the region's poorer countries. Although high inflation and under-investment in the national infrastructure continue to be problems, Costa Rica has consistently been among the top Latin American countries in the Human Development Index, ranking 50th in the world in 2006. It looks, therefore, that the lack of a liberalised mobile sector, rather than any general economic malaise, is what has stifled the take-up of cellular services.

When competition does come, it may be the case that ICE will need to up its game in several areas. The company's management, for example, will hope to have moved on from what seem to be quite serious mobile network quality issues affecting subscribers right now. Two days ago, news portal Inside Costa Rica reported that ICE expects problems with coverage and SMS delivery to continue into next year. An ICE official is quoted as advising customers to make calls and send messages during off-peak hours.

The final stop on Tammy Parker's whistle-stop CALA tour is in the Bahamas, where, "more than a decade after government leaders proposed the privatization of Bahamas Telecommunications (BTC)", a process has finally been launched a process to sell a 51% stake in the company to a partner that will also gain operational control. Apparently, the plan is for fixed-line telecommunications services, including cable TV, IPTV and Internet services, to be liberalised first, with mobile services set for liberalisation two years after the privatisation of the incumbent telco.

The new investor in the Bahamian telcoms firm will face some challenges right away. According to Neil Hartnell, writing last month for local newspaper the Tribune, BTC has seen the revenues derived from its international long distance business fall by 80.7% between 2004-2008. VoIP offerings from local firm IndiGo Networks as well as from the likes of Skype, Vonage and magicJack are blamed for this collapse. This has caused BTC to approach the recently incorporated Bahamian utilities regulator, asking for fixed-line international calls to be removed from the list of services in which the telco is deemed to have significant market power.

"Given the alternatives available to end users with respect to outgoing international long distance services, there is a case to be made to have international long distance excluded from the basked (sic) of price-regulated services," BTC said. "The inclusion of outgoing international long distance as part of price regulated services impedes BTC's ability to compete with licensed and unlicensed operators."

Tammy Parker's article concludes with the observation that "it will take time to assess which of these three countries will be most successful at bringing about the sought-after improvements in its telecoms market." Parker feels that "not only are their different approaches likely to yield vastly different results, but thorough execution of their plans will be paramount to generating the changes that they seek."

For those interested in the CALA region then, I guess it will be necessary to keep watching. DTW will try to do likewise.

CALA region privatisation, nationalisation and liberalisation: variety is the watchword