Digicel, the mobile phone company run by Irish billionaire Denis O'Brien, is suing Cable & Wireless for in excess of £300m, accusing the company of impeding its entry into the Caribbean telecoms market.
The international arm of C&W, run by Harris Jones, is the former monopoly player in many Caribbean markets and Digicel alleges that it deliberately delayed the company's entry into these new markets over a four year period. It expects its case to come to the high court next year.
News of the legal action comes on the eve of C&W's annual meeting in London at which shareholders are expected to give management a grilling over their plans to change the company's executive remuneration policy.
The board has recommended ditching a cap on the company's already controversial pay policy, meaning Mr Jones and John Pluthero, who runs the company's UK business, could pocket well over £20m each.
It is also looking to include chairman Richard Lapthorne in a highly lucrative new pay scheme that could see him pocket £11m in three years.
Digicel has almost 5 million customers across 22 markets in the Caribbean and South America. Its case centres on difficulties it claims it experienced gaining interconnection with C&W's existing network. This physical connection with an existing operator is crucial to any new entrant, who needs to be able to allow its customers to call and be called by people on other networks.
Having successfully launched in Jamaica in 2001, Digicel entered St Lucia, St Vincent & the Grenadines and Grenada, Trinidad & Tobago, Barbados and Guyana, where it won telecoms licences between 2002 and 2006 and started trying to connect with C&W's network.
"Without exception, in each territory, Digicel experienced resistance and obstruction from C&W. Indeed, in 2002 an internal strategy document produced by C&W revealed that C&W was intentionally delaying Digicel's entry into these markets for as long as possible," Digicel said in a statement.
"In St Lucia the launch by Digicel was delayed from before Christmas in 2002 until late March 2003 ... in Grenada it was delayed by 5 months; in Barbados by over 6 months; in Cayman by over 2 months; in Trinidad & Tobago by at least 4 months and in Turks and Caicos the launch was delayed by over 3 months."
"Aside from lost market share and future profits, Digicel lost revenue from call charges and interconnection fees payable by C&W in respect of inter-network calls originating on C&W's networks, costs and expenses arising from the unlawfully protracted process of interconnection in each territory, costs and expenses arising from the delayed launches, and lost management and staff time dealing with C&W's unlawful behaviour. The claim is expected to total some hundreds of millions of pounds," it added.
In fact, the claim is understood to be for well over £300m.
Digicel non-executive director and ex-Vodafone deputy chief executive Sir Julian Horn-Smith hit out at C&W on Thursday, saying "This action has only been entered into after serious consideration by the Board of Digicel. The consistent prevarication and obstruction that Cable & Wireless has undertaken providing interconnection in these seven territories is something that I have never witnessed before. A successful outcome for this case will ensure a much more fair and competitive environment for mobile in the Caribbean".
Mr O'Brien, activist investor in fellow Irish businessman Tony O'Reilly's Independent News & Media, made a fortune selling his phone company Esat Telecom to BT seven years ago.
In a statement C&W confirmed it has received the claim. "We believe the claim is without foundation and it will be vigorously defended," it added.
"C&W is gaining market share in the Caribbean where we are market leader in 10 out of 14 of our markets," it added "We believe that the claim is no more than a deliberate spoiling tactic by Digicel".
