The old St. Maarten Cable TV building in Madame Estate.
~ Purchase necessary to keep competition out ~
PHILIPSBURG–St. Maarten Cable TV was purchased for US $4.5 million, $2,934,000 of which was for the company’s fixed assets (buildings, vehicles, infrastructure, furniture etc.), Members of Parliament (MPs) were told during the continuation a Central Committee of Parliament meeting on Tuesday.
The purchase was necessary due to several factors, including to keep large competitors out of the market, which would have eventually stifled the TelEm Group.
The meeting, which was about the status of and situation surrounding the dismissal of St. Maarten Cable TV workers and the predicament of that company’s subscribers, had been requested and called more than a year ago, giving MPs a chance to pose their questions, after which the meeting was adjourned. The answers to those questions were provided during Tuesday’s meeting, more than a year after the questions were posed.
The TelEm Group had signed a purchase agreement to take over ownership of Cable TV from its former owner Innovative in September 2016.
In providing answers to MPs’ questions, Prime Minister Leona Romeo-Marlin said TelEm had been profitable when it purchased the company. However, Cable TV had been registering losses from 2014 to 2017 as a result of, amongst other things, the growing popularity of Android boxes, Roku and other over-the-top (OTT) products.
Figures provided to MPs during the meeting show that Cable TV subscribers had been gradually decreasing in recent years and their number had significantly plummeted after Hurricane Irma, while its Internet subscribers had been fluctuating over the years.
There were 6,624 Cable TV subscribers and 616 Internet subscribers in January 2015; 6,296 Cable TV subscribers and 940 Internet subscribers in December 2015; 6,030 Cable TV subscribers and 1,236 Internet subscribers in December 2016; 5,616 Cable TV subscribers and 1,452 Internet subscribers in August 2017, just before Irma; and 1,432 Cable TV subscribers and 817 Internet subscribers in December 2017. As of January 2018, there were 1,957 Cable TV subscribers and 827 Internet subscribers.
Romeo-Marlin said that when Cable TV came up for sale, the managing board had made the decision to try to purchase it. The supervisory board was presented with the option and the reasons, and gave the managing board the green light to start due diligence negotiations. The due diligence was done by experts in the field: a valuation of entire company and especially the areas in which TelEm was interested.
When deciding to purchase the company it was the intention to purchase so that the TelEm Group could make use of its underground pipes to execute its Fibre to the Home (FTTH) project; blowing fibre through existing pipes so as not to have to trench, and to keep a competitor out of the market.
“If a large Internet provider or Telco was able to buy the company, they would be able to enter the market and provide Internet access and VOIP [Voice Over Internet Protocol – Ed.] calls cheaply until TelEm loses enough market share, then goes bankrupt, and then raise prices,” the PM said. She said TelEm’s intention was to utilise the existing coax network for high-speed data in specific areas for a short period while the company executes its FTTH project.
“TelEm requested to purchase only the assets of St. Maarten Teleview Services NV [Cable TV], but the seller refused even after we offered to give the previous owner extra cash to pay out the employees. The sale could only be considered if the entire operation was bought.”
She said with the degradation of revenue from voice-related telecom services over the past years, TelEm was obligated to find other sources of revenue. Many telecom service providers are offering television as an additional service (content) next to their voice and Internet to increase average revenue per user (ARPU).
“TelEm is not different and was planning to get into television services even if the purchase of Cable TV was not available. Hence, the reason for requesting the approval of the transfer to TelEm of licences for cable network and television “machtiging” from the Minister and BTP [Bureau Telecommunications and Post St. Maarten].”
In the meantime, TelEm’s goal has not changed and it is still the company’s intention to temporarily use the coax network from Cable TV to provide data and television service until the completion of the FTTH rollout. The necessary services from contractors will be used temporarily to provide legacy television service until TelEm’s own Internet Protocol Television IPTV service is incorporated into the TelEm product portfolio.
The PM said a local NV had made a proposal to take over the operations of TV-15.
As of January 1, 2018, Cable TV customers had been paying their bills solely at TelEm branches and the funds are deposited on a Cable TV account.
Source: The Daily Herald https://www.thedailyherald.sx/islands/85003-cable-tv-was-bought-for-us-4-5-million
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