Government last night opposed Cable & Wireless' proposed acquisition of KeyTech Limited saying it would create a virtual monopoly that other service providers would find impossible to compete with.

The decision is a major setback to Cable & Wireless' $205 million offer to purchase KeyTech and may ultimately be the kiss of the death to the deal.

"Such an acquisition would not be in the best interest of Bermuda and would severely limit a sustainable, competitive environment," Minister of Telecommunications Michael Scott said yesterday.

"Such an acquisition would create a telecommunications service provider that would have significant market power and the potential for negative effects on a telecommunications industry that has benefited from diversity."

The Minister said that as one of two entities licensed to provide international telecommunication services, Cable & Wireless still has a major share of that market. "If combined with BTC, M3 Wireless and Logic Communications who also have a sizeable share of their respective markets, this would create a major force within the telecommunications industry that could become a virtual monopoly that other service providers would find impossible to compete with.

"The Government does not and will not support this acquisition. The Ministry of Telecommunications and E Commerce will continue to monitor any developments and we will respond appropriately to events as they unfold."

Earlier this month Digicel slammed Cable & Wireless' bid to purchase KeyTech as "monopolistic and not in the best interests of Bermuda".

A spokesperson for Cable & Wireless said last night that C&W president & CEO Eddie Saints could not be reached for comment but would provide a response as soon as the Government's decision had been digested. The Royal Gazette was also unable to contact KeyTech, TBI and Digicel.

Mr. Saints said Digicel's opposition would not jeopardise the proposed take-over.

"Shareholders and Government will decide, not the opinions of competition who will naturally oppose it and have not created strategies for the future."

TBI President and CEO Greg Swan had also opposed the deal and said: "Cable and Wireless is basically positioning themselves to provide a complete end-to-end solution for every customer and any competitor would be dependent on Cable and Wireless for the provisioning of services in Bermuda. The acquisition would clearly force the remaining carriers to reassess how services are provisioned locally and at least consider that possibility of consolidation," he added.

Mr. Swan said that TBI would prefer to see the telecom sector segmented as it presently is.

JD Buckley, Digicel Regional CEO said: "It would be a bad day for Bermuda if C&W, a company steeped in a tradition of monopoly and under-serving its customers, gained access to Bermuda's fixed line, mobile and internet markets, in addition to holding one of only two international licenses that currently exist within the local telecommunication industry."

Digicel's opposition the acquisition signalled a rising level of disquiet from other telecommunications providers voicing their concern about the bid and potential ramifications for the industry.

KeyTech's board of directors has rejected C&W's bid, advising shareholders it opposed the offer as "not in the best interests of shareholders and does not reflect the value of the company".