Telecommunications Operator in the Caribbean
Advisory Services
The Situation
A major incumbent telecommunications operator in the Caribbean needed to better understand its competitors. The incumbent operator was concerned that some competitors would attempt to use the regulatory process to blame the incumbent operator for their sub-par performance and lack of success in the marketplace in the hopes of having the regulator implement more onerous regulation on the incumbent and thereby obtaining a competitive advantage.
NERA's Role
NERA was commissioned to provide an independent financial assessment of competitors' overall financial health and to assess their near and long-term viability in the marketplace. Using traditional financial tools, we evaluated the financial health of competitors and conducted an international benchmark comparing the competitors with a group of peer telecom companies. We also performed a credit risk analysis based on a statistical comparison of the competitors with a sample of carriers in other countries.
NERA provided an assessment of competitors' managerial and strategic decisions and directions. We assessed the competitive landscape examining competitive rivalry within the industry, barriers to entry, and threat of substitutes. And, using basic tools in corporate strategy and organizational theory, we critically analyzed competitors' choices of strategy, such as market focus, product differentiation and cost/price leadership.
Finally, using our expertise in regulatory proceedings around the globe and in competition policy, we analyzed whether there was support for the notion that the regulatory environment was a reason for the problems that competitors faced and the types of arguments that competitors may use against the incumbent.
The Result
We found evidence of financial distress and accurately predicted near term solvency problems for some competitors. We concluded, however, that the regulatory environment did not explain the weak financial conditions and that major problems are primarily, if not exclusively, related to market conditions and financial, managerial and strategic decisions by the firms, and are not the result inadequate regulation. The operator used NERA’s assessment to successfully make its case before the regulatory authorities.
