C&W chairman: Don’t sink the incumbent

Cable and Wireless PLC Chairman, Richard Lapthorn, knows that the liberalisation of the Caribbean telecom sector is bad news. In 2003, Cable and Wireless’ revenues as a proportion to GDP stood at 4.5 percent, a decrease from the 1999 figure of 5.6 percent. Additionally, the workforce in the region had decreased from 6,854 to 4,190 during the last five years, a trend which has accelerated as the company has had to realign its cost base with the lower sales numbers followng liberalisation. “These changes are all the natural consequence of liberalisation,” he told those attending the Euromoney/Latin Finance conference at the Trinidad Hilton. 

Its Caribbean businesses in 2003 recorded a turnover of 783 million pounds, which accounted for approximately 4.5 percent of the aggregate GDP of the 15 countries in which the company operates. Cable and Wireless employs close to 4,000 people regionally. “The Caribbean is central to Cable and Wireless’ strategy,” Lapthorn said, “and we are committed to growing our businesses here in partnership with the communities we serve and with regional governments.” “Our relationship with the economies in which we operate could be described as symbiotic,” he said, adding, “economic strength of the Caribbean is central to our success.” While liberalisation in the telecommunication sector is good,  it should be regulated, he said.

“Liberalisation is a means to an end, not an end in itself,” he said. Moreover, it should not be about “sinking” the incumbent.  Liberalisa-tion, he said, should drive the productivity curve up so that total industry contributions were proportionally greater than they were before the market was opened to competition. “If all that doesn’t happen, if liberalisation is a zero sum game, then there is going to be a zero sum game in government revenues, a zero sum game in employment, a zero sum game in community development or worse, results in a shrinking contribution to these aspects of economic well being — then it will have failed as a tool for national and regional development,” he said. Cable and Wireless, which has operated a monopoly in the Caribbean for decades, has invested approximately one billion pounds in infrastructure in the Caribbean region alone.

The success of companies like Cable and Wireless, Lapthorn said, were highly dependent on the maintenance of strong partnerships with the governments of the countries in which they operate. “We want to work in partnership with governments to secure mutual benefit whenever this is possible. This can only work if there is reciprocal trade and trust between us,” he said. He described regional governments as equity partners with Cable and Wireless, a company that  contributed significantly to government revenues through the payment of taxes and dividends. “But that is not the whole story. Liberalisation should not just be about shrinking the incumbent.” The key to successful liberalisation, Lapthorn said, resided in the hands of the policy makers who needed to establish a strategy to facilitate competitors.

A liberalised system, he maintained, could not be had without proper regulation and such  regulations should facilitate investment. It should not be “short- term opportunist investment to make a fast buck.” Attracting efficient investment depended on a series of factors, he said, specifically the alignment of prices with costs, an act commonly referred to as “rebalancing.” If this was not done, then new entrants into the region would focus only on the profitable markets, ignoring what they consider to be the unprofitable ones. This will mean that competition will be short- term based and not sustainable.