FTC approves mega merger with conditions
The Fair Trading Commission announced today it had approved the application from Cable and Wireless, trading as LIME, and Columbus Communications, trading as FLOW, for a merger of their business operations in Barbados.
However, several conditions attached to approval of the merger emphasize the interests of telecommunications customers who are in line to receive a number of benefits, including lower prices on some services and the ability to keep their phone numbers if they switch from one company to another.
Conditions set by the Government’s regulatory agency for telecommunications and most other utility companies, also include the implementation of a number of structural changes and the divestment of a number of their assets to an unrelated buyer.
Initially, it will be the responsibility of the merged entity to find a suitable buyer that has the economic and technical capacity to maintain a viable network. However, final approval of the buyer will fall to the FTC.
The FTC will also appoint trustees of a holding company that will be responsible for monitoring the ongoing management of the divested assets. The trustees will be independent of the merged entity at all times and will submit monthly reports.
The merged entity, however, will be required to pay the trustees, the FTC said.
“The merged entity shall enter into agreements that allow the purchaser, for a period of 180 days, to access customers outside of the Karib Cable network but in the LIME/FLOW fibre network overlap during the period in which the purchaser deploys fibre to access these customers,” the FTC said.
In addition to submitting an independent valuation of the assets to be divested within 60 days, the merged entity must, within 45 days of the date of its decision or 30 days after closing the transaction, whichever is later, “vest such assets in a holding company”, the FTC has stipulated.
In the event that the merged company is unable to find a suitable buyer for the assets of the holding company within 180 days, the FTC’s trustees will assume that responsibility for a maximum of five years. After that, the trustees will place the holding company for sale on the open market.
“After the 180 day period, the merged entity must continue to seek out a buyer and report on the progress of seeking out such a buyer by providing monthly reports which include copies of advertisements placed, any commercial interest shown and minutes of meetings held to the Trustee(s) and the Commission,” the FTC explained.
It went on: “The merged entity must also notify the Commission when a new buyer emerges. The merged entity shall not, directly or indirectly, hold, acquire or re-acquire an interest in the divested assets.”
With the approval announcement came some particularly good news for landline customers. Within three months of the merger, the new company must offer the same prices, products and service standards to customers as offered by competitors.
In addition, the merged entity must adhere to its commitment that all current LIME and Flow Broadband and Television tariffs will be set at whichever level is the lower of the tariffs offered by the two companies.
“The merged entity, in accordance with its commitments, must be technically ready for Local Number Portability (LNP) in the fixed network by September 30, 2015 and Mobile Number Portability (MNP) in the mobile network by November 30, 2015,” the FTC also said.
In addition, a number of behavioural conditions must be met. The FTC said the merged entity must enter into commercial agreements for access to its poles, ducts and facilities, subject to the usual caveats of engineering suitability and access capacity. The FTC must be notified of the outcome of these commercial discussions.
The companies also will be required to divest one set of fibre cables in parts of Barbados where a “total overlap” of the LIME and FLOW networks exists. They also will be required to divest the Government Hill and Durants hub sites related to the fibre cables association, as well as the equipment on poles related to the fibre cables where such equipment is solely used to support the fibre cables to be divested.
The FTC said FLOW and LIME’s over 28,000 residential and commercial landline and broadband customers, as well as those related to the 27,000 plus homes passed by Karib Cable Network which is owned by FLOW, “must be released from any contracts, if they so desire, so that they are able to exercise the option to choose a service provider”.
During the transitional period, these customers are not to be disadvantaged, said the FTC.
In a brief response to the ruling, Cable and Wireless agreed that “as a condition for the approval”, it will “divest overlapping, duplicate elements of the combined fibre network in Barbados resulting from the acquisition”.
The telecommunications company, which has done business in Barbados for over 100 years, said it was confident the move would “attract much interest and provide consumer choice in the market”.
Meanwhile, at competitor Digicel, Chief Executive Officer Mark Linehan, told Barbados TODAY that while he welcomed the FTC’s decision, he would be meeting with the regulator to get some clarification on some areas which he declined to identify.
Linehan said from a cursory glance at the ruling, “we will be sitting with the FTC to fully understand the implications . . . (and) to get clarity on a number of points raised in the decision. “
“That is where we stand at the moment. We pretty much broadly welcome the decision because it confirms that significant divestment of assets must occur in order to mitigate any anti-competitiveness effects of such a merger and we welcome that,” he added.