Opinion: Telecom dilemma

POSTED: 08/2/13 4:30 PM

There is a moratorium on telecommunication licenses, Prime Minister Wescot-Williams said earlier this week. That is probably a good thing, but what does it really mean?

We have to mobile telecom providers: TelEm and UTS. A third one, Corporate Innovations (tradename Axcess Caribbean) is lurking in the shadows.

Data from telecom watchdog BTP show that there were around 67,000 mobile subscribers on the island at the end of 2011. That number is of course outdated, so by now it could be a bit higher, say, 72,000.

Currently that cake is cut in two – at least, there are two main parties nibbling on this cake – UTS and TelEm. There are no market-share data, so there is no way of knowing who has the biggest slice. One thing is certain – nobody has more than 72,000 subscribers.

Cut in half it leaves both players with a customer-base of 36,000 users. If Corporate Innovations enters the market, the same cake has to be cut in three pieces. They will be unequal, for sure, but it the three providers divided the market equally, they would each be left with 24,000 subscribers.

Is that enough to keep all three providers afloat? That is obviously the key question. Telecommunication might look attractive – what with all those smartphones and stuff – but at the end of the day the companies that drive the market have to make serious multi-million investments. Ideally, they also find a way to get a healthy return on their investment, and that money will have to come from a captive market of around 72,000 subscribers.

If all goes well, the companies will make that objective a reality. That will give them money to invest in new technology and to offer their customers top-notch service.

If the business results are disappointing, the customers that fund the companies are going to be the victim. Prices will go up and service will go down.

That is the dilemma St. Maarten is facing. Talks about a strategic partnership between TelEm and UTS have been going on for years, but it seems impossible to bring closure to this process.

Observers have pointed out on several occasions that the country does not need a third – let alone a fourth – provider. Curacao has three times the number of citizens St. Maarten has and the country has just two mobile providers.

At this moment it is unclear when Corporate Innovations will spring into action and activate it’s the concession Telecommunications Minister Franklin Meyers so generously provided to the company. However, there is no reason to assume that corporate Innovations will sit on its concession forever. After all, it fought years to get what it wanted.

The moment this new provider enters the market, trouble will begin. Revenue at the two competitors will inevitably go down, profit margins will tighten and jobs will be on the line. Whether customers that are dying for affordable and above all reliable mobile communication will benefit from this situation remains to be seen, and for the time being, we figure that this is highly questionable.

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Comments (1)

 

  1. To put a moratorium is everything but “a good thing.” In the end it will stagnate innovation and it will not be good for the end consumer as they will end up paying higher prices for less quality. There have been many investigations into this subject and they all arrive at the same conclusion: liberalization of the telecommunication market is in the interest of end consumers as it will lead to more innovation and more competitive prices. A moratorium will only protect Telem, UTS and Corporate Innovations, which companies will feel protected. In turn this will decrease their motivation and appetite to invest into innovation and they will maintain theit relative high prices.