Antitrust watchdog to file injunction against Digicel-Claro merger

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Wednesday, December 28, 2011

Jamaica's Fair Trading Commission (FTC) is to file an injunction in the supreme court to block the approved merger of telecoms providers Digicel and Claro, the Jamaica Observer reported.

According to the newspaper, the FTC claims the merger would reduce competition in the telecoms market.

Prime Minister Bruce Golding approved the Digicel-Claro deal on August 30. Under the acquisition deal, Digicel will sell its Honduras and El Salvador assets to América Móvil (NYSE: AMX), which in turn will sell its Claro Jamaica business to Digicel.

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The merger in Jamaica would reduce the mobile market to two players - Digicel and LIME - and give Digicel an estimated 80% market share.

Despite conditions imposed on the merger - namely: the obligation on Digicel to operate the two networks separately and to drop interconnection rates between Digicel and LIME, as well as a regulatory overhaul by the government, which could see greater powers over interconnection rates and the establishment of a separate telecoms regulator - LIME filed an injunction against it, which was rejected by a local court.

According to the report, FTC claims that from April 2007 (when Claro entered the market) to March 2011 (when the intended merger was announced) "it is estimated that customers' benefits from competition [among Digicel, Claro and LIME] exceeded J$16bn" (US$185mn). The FTC is contending that this monetary benefit to customers would be lessened should the merger go through.