Telecommunications: Jamaica's hottest growth industry
Published by www.jamaicaobserver.com on Sep 02, 2007
Sep 04, 2007

The government's liberalisation of telecommunications in Jamaica in 1999 has spawned an industry of service providers that has ballooned from one in 2000 to more than 200 providers and related companies today.

The original single provider, Cable & Wireless Jamaica since 1996, known as Telecommunications of Jamaica from 1981, the name under which it was listed on the Jamaica Stock Exchange in 1988 and known as the Jamaica Telephone Company before that, is still very much a player in the market, but how the game has changed!

Competition
Increased competition, greater customer focus, lower costs in some cases and an enriched supply of service choices are the hallmarks. The Telecommunications Act of 2000 helped achieve this in three phases over three years. First, the market was opened up to wireless telecommunication; the provision of customers' own equipment and to the re-sale of data, international voice and Internet access.

This was followed by even more heightened competition by allowing cable television providers to become Internet service providers, (ISPs). Then, all telecommunications facilities, including international voice and data services were opened up to competition.

This liberalisation created a market and the market attracted, some may even say created, a supply of ready-to-go individual and institutional entrepreneurs. It is not an easy market. Nothing worthwhile is. The first requirement of those entering the telecommunications market is that they must be able to take a long view.

As service providers seek to establish their competitive advantages, the consumer can benefit along the way. Not only are they exposed to new service combinations such as the bundling of Internet, video and telecommunications with voice over Internet protocols (VoIP) that greatly reduce the cost of international calls, but they also are able to get a glimpse of things to come. For example, some companies are already gearing up to offer voice, image and data capabilities combined. According to most international estimates, the pay-off in telecommunications is somewhere between five to ten years or longer, particularly when it comes to supplying wireless and mobile services.

Capital requirements

The telecommunications marketplace is also capital intensive. Consider where the money goes. First, there is the cost of the license that provides access to the transmitting and receiving frequencies to put you in business. The cost of licenses sold in Jamaica has ranged in price from US$6 million to in excess of US$50 million. After that, substantial sums must be spent to build or acquire a network infrastructure. Then comes the cost of acquiring or establishing switching centres and hardware devices. Add to this the cost of recurrent items such as marketing, administration, service and upkeep.

But, there is payback. New Business World, a blog publishing and marketing company, says that telecommunications will be the most profitable industry worldwide over the next five to ten years. They point particularly to the United States and China, where they say the greatest telecommunications demand exists and where they see parallels in the top five most profitable industries going forward.
In China, these are: energy; automobiles; medicine;
telecommunications & cellphones; and fast foods. In the US, the top five most profitable industries will be: energy; financial services; telecommunications and cellphones; large retailers; and fast foods.
When one looks at Business Week's most valued brands, five telecom or telecom related companies fall within the top 10: Microsoft, IBM, GE, Intel and Nokia. And, according to AOL Money, the Blackberry is the most profitable invention today.

Major Players

About two years ago, Jamaican-Canadian financier Michael Lee Chin saw the potential of the local market when he introduced his Columbus Communications, operating in Jamaica as Flow. To date, he has reportedly invested J$14 billion to build Flow's infrastructure and establish the brand. Flow has also been pursuing an aggressive acquisition policy in order to support their infrastructure and line-up market share.

Telecommunications is undoubtedly a future-reach industry and Mexican telecommunications giant, Carlos Slim Helu, may be about to become the biggest player in our market. He has reportedly paid US$72 million for Oceanic Digital with 200,000 subscribers, or about US$290 per subscriber. This is quite a discount when compared with American Movil's (the purchasing company) value of US$800 per subscriber. Potentially, American Movil could get a 100 per cent return on their investment in less than six months.

Oceanic Digital Communications is a 10-year old firm with interests in wireless licences and telecommunications operating in Jamaica as MiPhone and also in El Salvador and the Dominican Republic.
In August this year, Slim, with an estimated net worth of about US$60 B, surpassed Bill Gates as the world's richest man by about US$1B.

I find it interesting that Slim says that he takes his inspiration for investing in telecommunications not from an investment or financial person but from a futurist.

Slim credits, in part, the writings of his friend Alvin Toffler, a futurist author, for his success in being able to discover sound investment opportunities early. Toffler, through his books such as, Future Shock, Third Wave, and Restructuring Wealth is known for visualising his ideas regarding the digital revolution, communications revolution and corporate revolution.

The possibilities with Carlos Slim as another major player in our market almost seem limitless.
The field is open for visionary Jamaican entrepreneurs who can assemble the necessary capital. Some who have already taken the plunge are now seeing a pathway to substantial returns.

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