A strengthening of the KeyTech and Atlantic Tele-Network (ATN) grouping alters the telecommunications landscape in Bermuda.

It is a healthy development, believes Graham Pearson, chief executive of Bermuda-based Ignition Group of Technology Companies.

“With the ongoing contraction in the market place, primarily driven by the insurance sector, it was inevitable that consolidations in the services sectors would occur,” he said.

Mr Pearson said it was better to have “well-funded competition of the few rather than underfunded and struggling smaller players”.

He noted that telecommunications is a capital-heavy industry. US-based ATN, which is seeking to acquire a controlling interest in KeyTech, has a market capitalisation of $1.2 billion.

Mr Pearson’s company Ignition provides a range of services, including IT solutions, cloud hosting, network monitoring and hosting. He said: “We need the funds coming in to keep Bermuda competitive from an infrastructure standpoint.

“Our experience of the service levels and ageing infrastructure over the past 12-18 months have been cause for serious concern with reliability of the current infrastructure at its worst for years.

“Hopefully, this new injection of funds and the consolidation will address those issues.”

He added: “We do however have to rely even more on the telecoms oversight commissions to ensure there is fair play and the consumer gets competitive rates and service levels.”

The Regulatory Authority of Bermuda is the watchdog organisation that oversees the Island’s telecommunications sector. It will review the proposed deal.

Kyle Masters, the authority’s interim chief executive, said: “The public can be assured that the authority will be working to discharge its duty to ensure that sustainable competition in the electronic communications sector is promoted and that the public interest is protected.”

Mr Masters said he had been in contact with both KeyTech and ATN, and expected to receive formal notification shortly to enable the review process to begin.

In a statement, the authority noted that the proposed move would allow KeyTech to provide mobile, fixed and international telecommunications services under one banner.

Grant Gibbons, Minister for Economic Development, whose portfolio includes telecommunications, was unable to comment on the matter yesterday due to statutory obligations.

The proposed deal is the latest shake-up for the domestic market, which could once have been likened to a spaghetti plate of intertwined licensing.

Until a few years ago, Bermuda operated with three different licences for telecommunications providers; one for international service providers, one for domestic telephone providers and another for internet service providers (ISPs).

Moves to end the licensing regime and simplify the market by allowing providers to bundle services, in line with other countries, began three years ago.

In July 2012, the 60-40 ownership rule that restricted foreign ownership of Bermuda telecommunications companies to 40 per cent, also came to an end.

As a result of those changes the Island’s telecommunications landscape has been greatly altered.

Today, KeyTech and Digicel are the overwhelming heavyweights in terms of market share when it comes to providing internet, cellphone and telephone landline services.

And while it is difficult to establish definitive figures on market share, statistics gathered from annual consumer surveys suggest KeyTech has the upper hand.

In its most recent sector survey, published in January, the Regulatory Authority of Bermuda found that KeyTech-owned Logic was the dominant ISP accounting for 65 per cent of survey respondents. The survey was from a limited sampling of 403 residents.

In order of popularity, the next four ISPs were Bermuda CableVision with 12 per cent, Digicel with 9 per cent, TeleBermuda International with 8 per cent, and CellOne with four per cent.

Since that survey was released there have been further changes within the sector.

Logic already owned the majority of Bermuda CableVision, but in July it assumed 100 per cent ownership when the two companies merged.

Likewise, KeyTech has an approximate 42 per cent ownership of CellOne. If the proposed deal with ATN goes ahead, KeyTech will gain the US company’s 43 per cent stake in CellOne, and the minority shareholders will receive the right to have their shares converted to KeyTech ordinary shares.

In the mobile services sector, CellOne had the largest slice of the domestic market, according to the 2013 and 2014 market surveys conducted on behalf of the Regulatory Authority of Bermuda. The 2014 report, based on a limited survey of 400 residents, showed CellOne had 59 per cent market share, compared to Digicel’s 41 per cent.

Digicel bought the Bermuda Telephone Company in June, expanding its share of the Island’s telecommunications infrastructure and gaining a significant number of telephone and internet access customers. However, the telephone company was not an ISP at the time, therefore Digicel did not immediately boost its number of internet service customers as a result of the deal.