After the competition regulator imposed the release of part of the spectrum leased by Claro as a condition to the merger between the two companies, America Movil has announced its withdrawal from the move.
In March last year, America Movil announced an agreement to acquire a 100% stake of Digicel El Salvador, for an undisclosed amount.
The Superintendency of Competition (SC) of El Salvador conditioned the operation to Claro waiving the right to exploit 20 MHz of the total spectrum it owns in El Salvador. "The reason for this precondition to authorize the merger of operations of both companies is to retain the current level of competition in the cell phone industry to protect consumers' pockets", explained at the time the head of the SC, Francisco Diaz Rodriguez .
For the second time the Superintendence of Competition of El Salvador has refused permission for economic concentration between both companies.
From a statement from the Superintendency of Competition (SC):
SC does not authorize the purchase of DIGICEL
After carrying out technical legal and economic analysis, the Board of Directors (CD in Spanish) of the Superintendence for Competition (SC) decided to reject application of economic concentration by CLARO from the purchase of DIGICEL, considering that the proposed economic concentration has high probability of having an adverse effect on the dynamics of competition and consumer welfare in the markets for fixed and mobile telephony.
The Competition Superintendence of El Salvador has acknowledged receipt of a new request for the acquisition of 100% of Digicel’s shares by Claro in March 2012.
From a communciation from the Superintendence of Competition (SC):
SC Receives new application from CLARO - DIGICEL
The Board (CD) of the Superintendencia de Competencia (SC), has received a new application for a new merger request made by the company America Movil, which owns the CLARO brand, for the purchase all of Digicel’s shares.
Claro has submitted a new request to the Superintendency of Competition (SC) in El Salvador for authorization to buy Digicel.
The SC has received a new request for authorization of economic concentration on the part of America Movil, owner of the Claro brand, to purchase all the shares belonging to Digicel.
According to a review by the SC, the information and documentation submitted does not comply with some of the requirements of Article 35 of the Competition Act and 25 of its regulations and is not sufficient for analysis of admissibility, for which it has granted a period of thirty days for the applicant to remedy the situation.
The Mexican company will not be able to merge with Digicel unless it agrees to a condition to renouncen the use of 20 MHz of airwaves.
Regarding the ruling by Superintendencia de Competencia (SC), Daniel Choto writes in Elsalvador.com, "The reason for this precondition to allowing the merger of the operations of both companies is to maintain the current level of competition in the field of mobile phone companies in order to protect consumers' pockets, said the head of the SC, Francisco Diaz Rodriguez. "
Claro has asked the Superintendency to revoke its prior decision and "to consent without conditions to its consolidation operations."
The condition that Claro opposes, is the renouncement before the Superintendency of Electricity and Telecommunications (SIGET), of its right to operate 20 MHz of the total Salvadoran radio electric spectrum it has.
A press release by the Superintendency for Competition (SC) says:
The government of El Salvador requires the renunciation of the spectrums assigned to both companies individually, to avoid limiting competition.
The resolution by the Superintendency of Competition requires America Movil (Claro)"... give up some of the radio spectrum it has been assigned. This spectrum will be used by new competitors creating more competition and therefore consumer benefits".
The country's competition regulator is evaluating four requests for local companies to be purchased in the communication, pensions and trade sectors.
The four requests received by El Salvador's competition regulator (SC in Spanish) are:
- América Móvil purchase of Digicel
- Protección SA is seeking to buy AFP Crecer
- Tigo wants shares in Telefónica Multiservicios, which provides residential Internet services