Will the Claro-Digicel deal squeeze Lime?

Does the recent announcement of the proposed sale by Claro of its Jamaican operations to Digicel represent the final nail in the coffin for Lime?  Despite revamping its image Lime continues to fall behind Digicel and if this transaction is approved, Lime will be a very distant second.  The company faces an uphill task which perhaps may prove to be insurmountable.

Lime formerly Cable and Wireless has fallen into the category of companies which became complacent.  They enjoyed a monopoly in the market place but failed to recognise that the industry in which they were operating had radically changed.  The company did not consider the mobile market to be important and left it for Digicel who has turned it into a multi Billion dollar business.  The use of old technology did not help them either but rather contributed to the poor service which they were providing.  Ironically, it was Claro that was helping Lime to reduce the monopoly of Digicel and with their possible demise; Lime will constantly be trying to catch up.

However, the bigger concern for the consumer is the potential impact of the sale of Claro to Digicel.  With the elimination of the fierce competition between the two and with the increased domination by Digicel; consumers are likely to face higher prices for phone services.  Customers of Claro will have to wait to see whether Digicel will continue to offer them the packages that they now enjoy or whether they will be forced to migrate to Digicel with its higher phone rates.  It is likely that Digicel will increase the inter connectivity rates that Claro was charging to be in line with their existing fee structure.

This will result in Lime customers having to pay higher rates to call former Claro customers.  It would be logical to assume that Digicel would not need two wireless internet services and that one would have to go.  A bigger company in theory is to be more efficient and thus able to pass on lower rates to its customers.  Unfortunately this rarely happens in practice as dominant companies tend to take advantage of the consumers as we have all experienced with the banks.

At this time there has been no word from the regulators or the minister as to whether they would be in favour of such a sale.  At this time, reduced competition with higher prices to consumers would not find favour with the public.  However, it must be noted that higher prices will generate increased GCT revenue for the government and thus an incentive to approve the deal.

It seems to me though that there needs to be a policy regarding competition as in some cases it is encouraged, e.g. the importation of cement while in others e.g. the sale of Blue Cross to Sagicor it is not.  We wonder which way the pendulum will swing in this case