R1901D7310016

Lecturer: Dr. Fanos Tekelas

June 22, 2019

 Having been a public officer for all of my working life, I will attempt to conduct a PESTLE

analysis on a government project which, once fully implemented, is expected to foster innovation

and build competence and create an Information Communication Technology (ICT) enabled

economy. The impact of the internet is its ability to make large amounts of data available from

many sources (Englemann, 1996). Armed with that realization, the Government was spurred to act

to ensure that Saint Lucia and its citizens are not left behind in the global move towards e-

government and e-commerce through the use of ICT.

Given the march towards globalization, the Governments of Saint Lucia, Saint Vincent and

Grenad embarked on a project dubbed the Caribbean Regional Communication Infrastructure

Programme (CARCIP). The project, which is a public-private partnership in nature, is being

implemented by DIGICEL on behalf of the various governments at a cost of US$56 million and is

expected to include operators, schools, hospitals, emergency responders, government ministries

and departments on the government side and create opportunities for Digicel to expand its reach

islandwide and expand its product and service offering. For the purposes of this assignment, I will

concentrate on the Saint Lucia aspect of the project.

The objective of CARCIP is to increase access to regional broadband networks and to push

the development of an ICT-enabled services industry in Saint Lucia. It is expected that those

objectives will be achieved through (a) targeted investment in ICT infrastructure to fill the gaps at

regional and domestic levels, in partnership with the private sector and other development partners;

(b) create an enabling environment that fosters competitive access to infrastructure and an IT/ITES

and other knowledge industries; (c) enable and support the creation of e-services including

government services; (d) integrating rural areas in the knowledge and information society thereby

increasing their participation in the regional economy; (e) strengthening of institutional

arrangements to ensure effective programme implementation and outcomes and (f) improve

procurement and safeguard processes to ensure a sustainable investment climate in ICT.

Thompson, Peteraf, Strickland, & Gamble (2015) indicate that the external environment of

a company includes the industry-based conditions in which the firm competes and operates and

which can impact its operations positively or negatively. They further go on to recommend useful

tools for effectively evaluating the environment inclusive of PESTEL analysis, Driving Forces,

Competitor Analysis, Key Success Factors/KSFs, Value Net Analysis and Porter’s Five Forces.

For the purposes of this assignment, I will examine the external environment within which

CARCIP will operate by means of a PESTLE analysis. The acronym PESTLE stands for Political,

Economic, Socio-cultural, Technological, Legal and Environmental factors. A PESTLE analysis

is important for an organization to identify the factors in its environment which could impact its

operations and therefore need to be understood.

Since the Government of Saint Lucia (GOSL) is the owner of the project, one might tend

to believe that the government can controls all the conditions that however could not be further

from the truth. Earlier on, I indicated that the project was being implemented on behalf of the

GOSL by a multinational telecommunications firm and therefore the factors in the external

environment which may impact this government project may very be multifaceted.

POLITICAL environment – the history of telecoms in Saint Lucia saw the dominance of

one British company Cable and Wireless(C&W) in Saint Lucian and indeed the Caribbean

landscape. That dominance was in the form of a monopoly which lasted for over 40 years. The

end of that dominance saw the entry into the market of Digicel. However, given the long-standing

presence of C&W they now owned the telecommunication infrastructure. Digicel therefore could
not enter the market and truly compete except in the provision of mobile service and for that

purpose they contracted from C&W. In the meantime, Digicel was facing difficult in the open

market. With the advent of the CARCIP project and DIGICEL successfully bidding for the

contract, they needed to decide how to successfully implement given that they had no infrastructure

here in Saint Lucia. In that regard, the political environment was one of great uncertainty given

the fierce battle between the two (2) companies for dominance in the market. If the two companies

could not come to an amicable agreement the entire project would be derailed. The lack of network

big enough to handle the breadth of the CARCIP project is a factor which is critical to the success

of the project. On the other hand, if DIGICEL decides to build its own network, which ultimately

is what they decided to do, any delays in the build-out of that network would negatively impact

the implementation for the project components.

Digicel is a privately owned company. In 2016, DIGICEL had an Initial Public Offering

(IPO) of some 124 million shares at US$13 to $16 but later that same year withdrew (Nasdaq.com)

on the basis that the investment climate was not conducive. One political factor which may impact

any company is an election and in 2016 Donald Trump was elected President in the USA where

Digicel also does business. In fact, Digicel group saw a slump in its bonds at that time (Irish

Times, 2016) given Trump’s unexpected victory.

Given the foregoing, it would be to Digicel’s advantage to look at Public Private

Partnership (PPP) agreements for the purpose of building its infrastructure network. A PPP

arrangement is a viable investment method of financing and will make available the financial

resources of government coupled with Digicel’s resources and skills and the resultant

network ownership will be shared by the two parties to the contract based on agreed terms.
 Another factor in the external environment which affects companies is Economic and in

the case of Digicel, it is no different. The economy of Saint Lucia is impacted one way or another

by what takes place in the world economy. Therefore, should there be another slump on the market,

it will negatively impact Saint Lucia’s ability to meet its obligations and aspects of the project may

be negatively impacted. Of course, there exists a contract with DIGICEL, the breach of which will

cost the government dearly.

Given the multinational nature of Digicel, movement in the bond markets would affect it

operations. The company would experience difficulty in raising capital if investor confidence is

not high. Market interest rates or yield would soar causing a corresponding increase in debt for the

company (on this occasion their debt level was $6.36 billion). Announcement of a decision by

President Trump to boost infrastructure spending would also have the effect of increasing interest-

rate.

Fluctuations in currency would be an area over which they have no control but which would

affect its earnings potential and perhaps a strategic move would be to invest heavily in

infrastructure expenditure (cable and fibre) to deliver returns and cut costs.

A company can be affected by its inability to raise money with which to invest, lower it

debt and expand its operations if the market conditions are not favourable or are volatile. Such

was the case when Digicel tried unsuccessfully through an IPO to raise US$2 billion.

As it relates to the local economic environment, the vat rate at the time of contract

negotiations was 15%. However, in 2017, as part of a manifesto promise, the government reduced

VAT to 12.5%. That reduction would have the benefit of reducing the overall cost of the project

since no company is VAT-exempt.

 Saint Lucia’s economic freedom score is 68.7, making its economy the 38th freest in the

world, an increase by 1.1 points, with much higher scores on fiscal health and government

spending easily offset declines in judicial effectiveness and property rights. Saint Lucia ranked 4th

among 32 countries in the Americas region and its overall score is above the regional and world

averages. The economy has benefitted from foreign direct investment in such sectors as offshore

banking, transshipment and tourism. The commercial infrastructure is well developed, the

workforce educated, the communications system has seen significantly upgrades and there exists

a business-friendly entrepreneurial climate. The country has high levels of public debt (71.3% of

GDP) and debt-servicing cost occasioned by past expansionary spending which have constrained

the government. Relatively high tariffs and non-tarrif barriers limit market openness (Index of

Economic Freedom (2019)).

Tourism is the primary $ earner and the main source of foreign exchange earnings. It

accounts for 65% of GDP. Foreign direct investment is screened by government.

A strategic move on the part of Digicel would be to pursue more PPP agreements

especially given that most of their market locations are in the Caribbean and Pacific small-

island states where financing is usually facilitated by agencies such International

Development Association of the World Bank (IDA) in the form of loans and grants to country

governments for development purposes. Yet another move would be to apply to the

government for concessions on the importation of goods for the implementation of the

project.

Socio-cultural aspects of the environment which would impact business would include a

population of 182,790 compared to the 2009 census of 173,700. Despite being one of the smallest
countries in the world (617 square kilometers or 238 square miles) ranking 191st, St Lucia has a

fairly high population density of 298 people per square kilometer, which ranks 41st.

The capital and largest city is Castries, with a population of 70,000 in 2014 or more than

one-third of the total population. Castries is a major tourist destination, a cruise ship port, the centre

of government and private sector business.

St Lucia's population is evenly split between rural and urban areas, despite the high

population in Castries. The population is mostly African or of mixed African-European descent,

with a small population of Indo-Caribbeans (3%). Afro-Caribbeans account for 68% of the

population, followed by mixed (17%) and European (5%). The official language is English, with

Saint Lucian Creole French (Patois (pronounced Patwah) locally) spoken by 95% of the people.

70% of the population is Roman Catholic, while Seventh-day Adventist making up (7%) and

Pentecostalism (6%). The unemployment rate among youth stood at 15% for the period Jan-Mar,

2019 and given the (Central Statistics Office) despite satisfactory level of secondary education.

According to economywatch.com, the internet penetration rate is 87.20% as at June 2019

while there are 641.42 mobile phones per 1000 people. The internet penetration rate and mobile

phone ownership will augur well for Digicel as there is definitely a market for its services

especially in the rural areas and, given the high unemployment among youth who are the primary

users of the internet and internet services, the opportunity exists for increased level of

entrepuneriship to develop through the use of ICT services to be offered by Digicel.

Technologically speaking, the opportunities available to Digicel are vast as ICT has great

potential to bring the population at several levels to the industry which can provide services across

the country, the region and the world. Opportunities exist for small business connectivity to each
other, to their markets and to governments and equalizes the playing field between urban and rural

businesses. The Carcip project provides opportunity for Digicel to extend its reach locally and by

extension regionally and creates opportunities new markets such as healthcare via remote access.

Further, there are opportunities in the market as many governments have voiced an interest in

Smart Cities wired into today’s technology. The environment is therefore favourable for expansion

and further investment.

The Legal environment is favourable as data protection laws have been enacted to provide

protection in the ICT sector for personal data and information while electronic signature legislation

is in force and is legally recognizable. This augurs well for e-commerce in Saint Lucia, the region

and the world and will serve as an enable to Digicel’s business. Also, there is an ICT policy to

support the development of the sector.

There is some transparency in the ICT industry and policies encourage investment in the

sector. The technological environment offers opportunities for collaboration for cost efficienty and

economies of scale regionally and sub-regionally and the Carcip project is one such venture.

Generally, Saint Lucia has a good legislative framework to protect property right but

enforcement is weak. However the regulator environment for business facilitates entrepreneurial

activity and create opportunities for expansion of Digicel’s business into several service areas and

beyond.

As it relates to the Environment, increasingly, environmental concerns such as have been

brought to the fore as Saint Lucia which is highly vulnerable to natural disasters with potential for

loss of life, property damage and environmental change due mainly to its small size, high

population density, economic reliance on climate sensitive sectors (tourism, agriculture and
telecommunications). These hazards include hydro-meteorological hazards such as tropical storms

and hurricanes, floods, storm surge and landslides and geological hazards like seismic and volcanic

activity and climate change. The impact of a natural disaster can negatively impact Digicel’s

operations and impact their earnings potential.

A strategy which they can consider is the use of fibre-optic cable for the build-out of

its network in Saint Lucia and other Caribbean countries to build resilience to the impact of

hurricanes and tropical storms.

REFERENCES:

2010 Saint Lucia Population and Housing Census, Government Statistical Department,

Census Office (accessed online June 20, 2019 at caricomstats.org).

2019 Index of Economic Freedom of the World (accessed online June 20, 2019 at

www.https://heritage.org/index/ranking).

Pan-Caribbean SME ICT Competitiveness 2005/2006 – ICT Development Strategy for Saint

Lucia, Commonwealth Secretariat, Mega Ace Consultancy, India/UK, (2006).

CARCIP – Fostering Innovation, Building Competence – Creating an ICT Enabled economy

(accessed online June 20, 2019 at https://carcip.govt.lc)

economywatch.com (accessed online June 22, 2019)

NASDAQ (accessed at nasdaq.com/markets/ipos/company/digicel-group-ltd-968983.78816)

Guidelines for Successful PPP (2003) published by the European Commission

Thompson, A., Peteraf, M., Gramble, J., Strickland, A., (2015).

Crafting and executing strategy: The quest for competitive advantage: Concepts and

cases(Twentieth ed.). New York, New York: McGraw Hill (2015).

Robinson, Shonell Jodian. 2017. P114963- CARCIP St. Lucia Audited Financial Statement

Year Ended March 31, 2016 (English). Washington, D.C. : World Bank Group.

http://documents.worldbank.org/curated/en/506961484758144189/P114963-CARCIP-St-

Lucia-Audited-Financial-Statement-Year-Ended-March-31-2016