Digicel exits Panamanian market

Digicel is winding down its operations in Panama following the Panamanian government’s approval of a merger between Cable & Wireless Panama (CWP) and America Movil subsidiary Claro. The Panamanian government will be a 49% shareholder in the resulting merged provider, which will have 56% market share.

In a release announcing its exit, Digicel chairman Denis O’Brien said: “Since the announcement of the merger, Digicel Panama has repeatedly conveyed in writing to the authorities that approval of the merger without appropriate remedies would result in our exit as we cannot continue to fund the semblance of a three-player market. In addition to the initial licence cost, the continuous requirement to buy additional spectrum through auctions, together with the exorbitant renewals costs contribute to a high cost regulatory environment.” The company paid $86 million for its operating licence in 2008 and has spent a further $575 million since.

Digicel claims the merger will effectively spell the end of competition in the telecoms market for smaller players. Alleging that it had asked the regulator to intervene in what it called “predatory pricing and below cost selling” practices by CWP-Claro which it says has resulted in a “significant deterioration” in the market. Other than the new CWP-Claro entity, there is now only one remaining telecom provider – Millicom-owned Tigo.

Digicel says that before taking the decision, it had appointed an investment bank to actively market the business, engaged extensively with the Panamanian Competition Agency, and had sought to migrate customers to another operator.

Digicel notes that the decision to exit the Panamanian market will have no impact on its wider business, or its operations in the other 31 markets in which it participates.