Mobile/cellular company, Ozone Wireless, in Barbados, is reportedly in the process of restructuring its operations, but can it become a successful player in the a market already dominated by Digicel and Flow?

 

If you listened to our recent podcast episode on the Barbados ICT and telecoms landscape, you would have heard mention of a third mobile/cellular company in Barbados, Ozone Wireless. At the time, our guest, David Smith, of the Barbados Chapter of the Internet Society, was unsure about the status of the company, but acknowledged that it had been experiencing some difficulty.

In this week’s news roundup, one of the articles provided an update. Effectively, Ozone Wireless is not longer operating. The company has amassed considerable debt, and had been barred from using Digicel Barbados’ and Flow Barbados’ infrastructure. It had also laid off most of its staff, and control for the business had been handed over to a company in Saint Lucia, which indicated its intentions to restructure operations, and essentially, build the business back up “from scratch” (Source:  Barbados Today).

However, again referring back to our conversation with David Smith. Barbados has robust telecoms and ICT infrastructure that covers virtually the entire population. The two main players,  Digicel and Flow, are well established in the market, and there are high expectations about the types of services offered. So having already failed in the Barbados market, can Ozone Wireless not only recover, but become a force in the Barbados telecoms and ICT market?

 

What is the precedent?

Truth be told, and based on precedent, Ozone Wireless’ chances appear slim. To a considerable degree, many Caribbean countries tend to be duopolies, particularly in the mobile/cellular market. In most English-speaking countries, Digicel and Flow own the mobile/cellular networks and provided the associated services. For fixed-line services, and with the merger of LIME and Flow as few years ago, a single carrier, Flow, is common across the region.

On the other hand, with respect to the Internet service segment, there seemed to be a bit more latitude. In countries where Digicel has rolled out its Digicel Play service, it is usually the second largest player, behind Flow. However, in some countries, there are also some smaller Internet Service Providers (ISPs) that have carved out niche markets, but in no way compete with Digicel and Flow in terms of scale and coverage.

Hence, the experience of Ozone Wireless in Barbados is not new in the Caribbean region. Several countries that currently have two major players, at one time had three or four, that were since acquired and merged with the main players. What might be the reason for the mergers? In the majority of instances, no explicit reasons were provided. However, contributing factors are likely to include: the smaller customer base of the purchased company;  the difficulty in increasing that customer base; the limited resources and likely financial constraints of the purchased company; and the price offered by the acquiring company.

In essence, while in some instances, it might be possible for some of the companies that had been acquired to continue to limp along, they may not have had the resources to continue to grow their operations, and keep up with the sector. More importantly, and with the requisite support, they may have had to shut down their operations, which would have been a greater loss.

 

What does that say about the expectation of more competition?

At this juncture, and to a considerable degree, competition is the telecoms and ICT sectors in most Caribbean countries is maturing. Many of the countries have been liberalised and open for competition for over a decade. Further, and in response to that, their incumbent carriers and the other existing players have built out their (wired and wireless) networks to the extent remains economically feasible to do so. It therefore means that prima facie, greenfield opportunities tend not to be readily evident. Hence, a new entrant is unlikely to have first mover advantage in any particular segment, and so be in a position to secure a sizeable return on its investment.

Having said this, we still have policymakers, in particular, clamouring for increased competition than what currently exists in their countries’ telecoms and ICT markets. Moreover, there is an expectation that this competition will drive service rates down further. However, based on the outcomes of our assessments, here on ICT Pulse, rates for some of the services appear to be increasing year-on-year.

Although there may be scope for the major carriers to lower their rates, the regulatory provisions through which that can be mandated, are not readily evident in many Caribbean countries. Further, a point that is frequently overlooked, is the high cost of doing business in the region, which leads to high operating costs for the carriers. For example, all equipment and materials must be imported, and many countries are subject to high energy costs, high cost of living, and are also subject to the currency fluctuations, to name a few, which must all be accounted for in the rates payable, whilst still providing companies with a reasonable return on their investment.

 

Final thoughts…

Suffice it to say, this discussion on the Caribbean region’s ability to accommodate more than two players is not new. We, at ICT Pulse, have been highlighting the issue since 2012, with the merger of Claro and Digicel in Jamaica. However, it appears that we still have not yet learned how to move beyond the two-player market. More importantly, we may not have truly attended out minds to find solutions – to have successful multi-player markets – that maximise the perceived benefits, whilst managing the risks. Hopefully, Ozone Wireless will beat the odds.

 

 

Image credit:  Gerhard Gellinger (Pixabay)