Claro ' s bid to acquire local rival Digicel has been rejected for a second time by El Salvador ' s c ompetition c ommission , Superintendencia de Competencia (SC) . The proposed merger is the last of three deals agreed between the two companies in El Salvador, Honduras and Jamaica. Regulators in the latter two countries approved the deals, leaving the acquirers in each market with strong market shares. BMI believes that the SC ' s decision is a positive reflection on the commission, encouraging competition to remain in the market.
|Competition Would Be Reduced|
|Mobile Market Shares, June 2012|
El Salvador's mobile market has shown strong growth, driven primarily by the high levels of competition in the market. Latin America's largest telecoms investors América Móvil (Claro) and Telefónica ( Movistar) are present along with regional players Millicom International Cellular ( Tigo) and Digicel. This has led to the market achieving 137% penetration by June 2012. BMI estimates Claro had 2.2mn subscribers in Q212, which would have risen to 3.5mn if its merger with Digicel had been approved. This would have made it the largest operator in the market with 41%, ahead of current market leader Tigo's 35.8% share.
While BMI has argued that Claro's acquisition of Digicel would have benefited the company by offering it economies of scale, we have been concerned since the announcement of the deal that competition would be negatively affected ( see our online service March 14 2011, 'Concerns Over Digicel-Claro Asset Exchanges in Jamaica'). We believe this will play out in Jamaica where Digicel now holds over three-quarters of the market and to a lesser extent in Honduras where Tigo has a stronger market share and the merged Claro holds 43.4%.
The SC set restrictions in August 2011 that Claro has fought, including the return of 20MHz of spectrum and an agreement to maintain Digicel's market strategy for five years. The 20MHz spectrum would then be reserved for a new player in the market. As 20MHz spectrum accounts for 40% of Claro's total, the company's reluctance is understandable. Claro would have undoubtedly gained from the Digicel merger in the immediate term, and a new player would ensure competition remains.
BMI sees the SC's decision to hold its ground as positive for the country's business environment and the regulator's commitment to competition. Claro has not announced any further moves following the SC's ruling, but BMI expects that Digicel will still look to exit the market in the near future.
|Mar-11||Claro and Digicel announce a deal to swap assets in El Salvador, Honduras and Jamaica.|
|Jun-11||SC accepts new application for Claro-Digicel merger.|
|Aug-11||SC imposes restrictions on the deal, requiring Claro to return 20MHz of spectrum before the merger is approved and maintain Digicel's marketing strategies for five years.|
|Sep-11||Claro calls for restrictions on acquisition to be lifted.|
|Oct-11||SC rejects an appeal from Claro to reconsider restrictions on its proposed acquisition.|
|Dec-11||Claro rejects regulator's condition of returning spectrum. Acquisition fails.|
|Mar-12||Claro restarts process to gain regulatory approval to acquire Digicel.|
|Apr-12||SC states that Claro's March 28 application does not comply with requirements and offers 30 days to resubmit.|
|Jul-12||SC accepts new application for Claro's acquisition of Digicel. Decision to take 90 days.|
|Sep-12||SC again rejects Claro's application, stating competition would be harmed.|