Renewing old Caribbean rivalries
As the Caribbean market enters 2013, the rekindling of old rivalries and new subsea cable routes appears to be top of the agenda.
Despite the limited growth potential of its small telecoms markets, the Caribbean’s major carriers appear confident in the region and continue to invest in both telecoms networks and marketing to gain an advantage over rivals.
This confidence is also apparent in the subsea cable segment, where several major projects are set to capitalise on the Caribbean’s fortuitous position between North America and Latin America.
In 2012, the Caribbean’s two largest players Digicel and Cable & Wireless Communications (CWC) continued to battle for leadership in the market, and there are signs that this could only intensify in 2013 after CWC reached agreements to sell off its Monaco & Islands and Macau assets.
As one of the largest players in the region through its LIME brand, CWC has interests in many Caribbean nations, including Anguilla, Antigua & Barbuda, the Bahamas, Barbados, British Virgin Islands, Cayman Islands, Dominica, Grenada, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent & the Grenadines and Turks & Caicos Islands.
Market watchers expect that CWC will focus on its remaining Caribbean assets this year, opening the next chapter of competition between Digicel and LIME.
Some reports suggest that further acquisitions could be part of CWC’s renewed Caribbean strategy. The company is thought to be planning to increase its stake in the incumbent Telecommunications Services of Trinidad & Tobago (TSTT) to a majority interest. If an agreement cannot be reached with Trinidad’s government to do so, reports suggest CWC will exit the market.
A game of island monopoly
The Jamaican market was thrown into controversy last year after Digicel was given permission to combine newly acquired Claro’s network with its own. Former Jamaican Prime Minister Bruce Golding had initially prevented Digicel from assimilating Claro’s infrastructure through a clause in the deal, but this was removed when Golding was succeeded by Andrew Holness.
Claro customers were given the option of being switched to Digicel or choosing another service provider, but large groups of consumers were forced to buy new handsets because their Claro phones were incompatible with the Digicel network.
The move cemented Digicel’s new-found dominance in Jamaica; a position the operator appears to be looking to capitalise on having announced it was considering the possibility of investing in its own cable connecting Jamaica to the US.
However, its dominance could be challenged if CWC’s LIME is able to launch LTE services ahead of its competitor. The Jamaican government announced in July that it was planning to launch an auction for 700MHz frequencies to allow operators to launch LTE services. No further details have been given since, other than that the auction would have a reserve price.
Digicel has also been looking to disrupt its rival elsewhere, having reportedly been involved in talks with Bahamian Prime Minister, Perry Christie, in December 2012 regarding possible entry into the market. The Bahamas Telecommunications Company (BTC) holds exclusivity in the country’s wireless sector until 2014 as part of the conditions of CWC’s $210 million controlling stake acquisition in the company in 2011.
Christie reportedly said he believes that the Bahamas could benefit from a new entrant but declined to give further details due to his obligation to BTC, in which the government owns the remaining 49% stake. Once the monopoly period is over other operators will be able to enter the market, meaning another battle between Digicel and CWC could be on the horizon.
A new challenger?
Although much of the activity from the region comes from Digicel and CWC there are also other players looking to gain a foothold in the Caribbean. One of these is Barbados-based carrier Columbus Communications, which offers triple-play services under the brand name Flow and owns capacity and IP service company Columbus Networks, operator of several of the region’s subsea cables.
In June 2012, Columbus entered an agreement to acquire TeleBarbados, Tele-St. Lucia and Wamco Technology Group, adding to Flow’s existing operations in Jamaica, Trinidad, Grenada and Curaçao.
The TeleBarbados acquisition gave Columbus licences to provide domestic and international voice and data services, wholesale backhaul capacity, internet exchange service, public internet access, fixed wireless telecoms services and managed data and VPN services, as well as wireless spectrum-based offerings.
Columbus Communications CEO, Brendan Paddick, said that the company plans to invest heavily in Barbados over the next 24 to 36 months and will launch triple-play services, IP video services, and a series of corporate data and connectivity services.
With similar licences gained through the acquisition of Tele-St. Lucia, Columbus has become a force to be reckoned with in the south eastern Caribbean.
Bridging the Americas
The Caribbean acts as a bridge between North and Latin America, and as a result plays host to a spider’s web of subsea cables. An increasing hunger for bandwidth in both the Caribbean and Latin America is driving the development of new additions to this web, particularly as operators roll out HSPA+ and LTE technology.
One cable in the works is the 17,500km AMX-1 linking Brazil, the US, Mexico, Guatemala and the Caribbean nations of Puerto Rico and the Dominican Republic, and then on to Colombia. América Móvil’s Mexican business Telmex is constructing the 40Gbps system, which will serve the needs of the carrier’s subsidiaries across the region. AMX-1 is scheduled for completion in August 2013 and will have an estimated lifespan of 25 years.
The 6,000km Pacific Caribbean Cable System (PCCS) linking between Florida, US and Manta, Ecuador is also under construction and is scheduled to become operational in Q3 2014. The 100Gbps system will have landing stations in the British Virgin Islands, Puerto Rico, Aruba, Curaçao and Colombia.
PCCS is designed to cater for demand for online content, such as tourism related services, sports coverage and digital TV, and will substantially increase capacity for broadband and international connectivity in the pan-American region.
Alcatel-Lucent was chosen as the deployment contractor for the cable which will have a total design capacity of 80Tbps. The cable project is being led by a consortium including CWC, Setar, Telconet, Telefónica Global Solutions and United Telecommunications Services (UTS).
“The PCCS cable will add to the extensive subsea cable assets we have in the key corridor between North and South America and help us to meet the demand for good value, high-quality international connectivity from telecoms and pay TV companies in the Caribbean, Central and South America. PCCS will also help us to support increased broadband penetration and usage in the pan-American markets in which we operate,” says Felix Camargo, COO at CWC Wholesale Solutions.
These subsea developments will help the Caribbean capitalise on video, which is set to be the biggest opportunity and challenge for the market, according to Yankee Group. This notion is agreed by another of the region’s subsea operators, Oi’s GlobeNet, which more than doubled the lit capacity on its Caribbean cables at the end of 2012, bringing total capacity on the route, linking the US to Latin America, to 1.2Tbps.
“When it comes to long-haul video transport, submarine cable systems are, without a doubt, the best option to meet today’s increasing video demands across the globe,” says Erick Contag, COO of GlobeNet.
Top two Caribbean markets to watch in 2013 >>
This year Cuban mobile subscribers will, for the first time, not have to pay to receive calls and messages, following the introduction of a calling party pays (CPP) system by telco monopoly Empresa de Telecomunicaciones de Cuba (ETECSA).
This will likely spur greater mobile adoption but potentially at the expense of fixed growth, where subscribers will still be charged to receive calls. At the start of 2013, it was also reported that the Alba-1 cable linking Cuba and Venezuela has gone live, nearly two years after being completed.
Research firm Renesys says that its global monitoring system has picked up indications that the cable has been activated, although in a “rather curious way”. If the reports are true, it could have a significant impact on the country’s infrastructure.
In 2012, Waldo Reboredo, VP of ETECSA, stated that the fibre-optic cable “would reduce the costs of current operation by 25%”.
January 12 2013 marked the third-year anniversary of the Haitian earthquake, which reduced many of the island’s buildings to rubble and killed hundreds of thousands of people. As well as telecoms infrastructure on the ground, the quake left Haiti’s only direct subsea cable connection – Bahamas Domestic Submarine Network (BDSNi) – damaged, although it was later restored.
Bahamas Telecommunications Company (BTC) had been looking to sign up Haiti’s mobile operators as voice/data wholesale customers on the route, but Digicel had other plans. In March 2012, the country’s largest mobile operator announced it would fund a 200km subsea route connecting Haiti to the existing FibraLink cable owned by Columbus Networks at a cost of $16 million.
This was followed by Digicel’s announcement that it had acquired its closest rival in the country, Comcel, from Trilogy International Partners and by September Digicel had fully integrated the operator’s network into its own. Having already been the dominant player in Haiti’s mobile market, the Comcel acquisition further cemented Digicel’s leadership, which already stood at around 63% wireless market share before the deal.
There are, however, signs that state-owned operator Natcom could challenge Digicel’s position having built up a market share of 20% in just over a year of operation to claim second place.