Haiti Regulator Adopts Interconnection Guidelines

Last week, the Conseil National des Télécommunications (CONATEL), the telecommunications regulator in Haiti, adopted new guidelines for the interconnection of telecommunication networks.  These guidelines provide detailed information on the procedure to be followed by new operators seeking to interconnect with existing operators, the content of interconnection agreements and the role of CONATEL in resolving interconnection disputes.

To my knowledge, these are the first interconnection guidelines issued by CONATEL since the Haitian telecommunications market was opened to competition in 1999.  Under their current licences, the operators are required to negotiate interconnection agreements, but little regulatory guidance is provided for the negotiation of these agreements (see, for example, art. 11 of the Teleco licence).  Whilst the operators have done their best over the past few years to negotiate interconnection agreements, the rights and responsibilities of each party (and of CONATEL) were not clearly specified under Haitian law.

It is not surprising, therefore, that Haiti has faced several interconnection disputes over the past decade.  In the summer of 2006, for example, Le Nouvelliste reported that Digicel was refusing to sign the interconnection agreement previously signed by Comcel et Haitel.  This dispute was eventually resolved, in September 2006, when Digicel, HaiTel and Comcel signed interconnection agreements.  Later, in October 2007, the incumbent fixed-line provider, Teleco (recently purchased by Viettel, the largest Vietnamese telecom operator) ceased all interconnection with Haitel due to non-payment of interconnection fees. This dispute was later resolved, following a ruling of the Haitian courts.

Interconnection disputes will continue to be a fact of life in the Haitian telecommunications market, despite the adoption of these guidelines. However, the adoption of these guidelines will clarify the rights and obligations of the parties.  This, in turn will make Haiti a more attractive and predictable market for investors wishing to enter the telecommunications market.

Will Digicel buy Belize Telemedia?

Over the past few months, a number of media outlets have speculated that Digicel is considering a possible acquisition of Belize Telemedia Ltd. (BTL) shares.  Amandala, a newspaper in Belize, noted in an article on Friday "that a Digicel team was given a tour at BTL last week, and they are in the process of exchanging information, under the terms of a non-disclosure agreement between the parties".  

Digicel's interest in BTL is somewhat surprising. Clearly, Digicel is not afraid of political risk.  Indeed, given its presence in markets such as Fiji, Haiti and Honduras (all of whom have faced coup d'états in the not-so-distant past), it is tempting to conclude that Digicel thrives on, and seeks, such risk. However, in the case of Belize, the political risk is different.  While the local parliamentary institutions are relatively stable and democratic, they have an unfortunate propensity to exercise political control over (and interfere with?) the telecommunications industry.  This propensity was at its peak in August 2009, when the Belize National Assembly amended the country’s Telecommunications Act and allowed the Government to seize control of BTL, with shares to be distributed to domestic investors.  This propensity is also demonstrated by the Government's current refusal to sell a controlling interest in BTL to Digicel, thereby limiting Digicel's participation to a minority shareholding.

Besides political risk, an investment in BTL would involve a significant degree of legal risk for Digicel.  As a result of the recent nationalization of BTL, some of the former shareholders of BTL have instituted proceedings before the Belize Supreme Court challenging the constitutionality of the legislation which expropriated their shareholdings.  They argued that there was no legitimate public purpose for the compulsory acquisition of the shares, that it was not necessary to compulsorily acquire the shares in order to achieve the public purpose stated in the legislation, that the acquisition was disproportionate and discriminatory, and that - in reality - the real purpose of this acquisition was to target Michael Ashcroft's alleged interest in BTL. The Supreme Court issued a judgment in this matter in July 2010 dismissing the challenges to the constitutionality of the nationalization, but directing the Government of Belize to pay compensation without delay.  This decision is currently under appeal.

In early September, Digicel received a formal notification by the shareholders' attorneys indicating that:

In the event that any shares in BTL were to be transferred prior to the final determination of our clients' rights on appeal, such transfer would be liable to be set aside in the event that the appeal court finds that the compulsory acquisition was unlawful and invalid.  In such circumstances, the [Government of Belize] would have no title to the shares which could be validly transferred.  

Therefore, in addition to the political risks, as demonstrated by the recent nationalization of BTL, Digicel is also faced with the legal risk that its investment in BTL could be invalidated on appeal.  

Lastly, and perhaps most importantly, this investment does not appear to fit Digicel's overall business strategy of going head-to-head with incumbent telecom operators in recently liberalized markets.  In this case, rather than being an "incumbent fighter", Digicel would become a minority shareholder in the incumbent operator.  This could  restrict Digicel's ability to replicate the formula it used successfully across the Caribbean, Central American and Pacific, namely to target budget-conscious prepaid users with intense local marketing and sponsorship.  It is precisely for this reason that Digicel decided to delay its entry into the Bahamian telecom market earlier this year (see article in the Nassau Guardian).

Clearly, Digicel will have to think twice before making an investment in BTL...