The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable & Wireless Communications (CWC) initially demanded a three-year extension to the Bahamas Telecommunications Company’s (BTC) existing cellular monopoly as the price for giving up majority ownership, Tribune Business was told yesterday.

This was among the details revealed yesterday by Franklyn Wilson, chairman of the Government-appointed negotiating committee, who also disclosed that CWC warned BTC would have to be “expropriated”, or re-nationalised, if the Christie administration wanted to regain Board control. Management control, though, was never an issue for discussion.

The other key points disclosed by Mr Wilson, under questioning by Tribune Business, were:

• CWC rejected an initial public offering (IPO) of shares to the Bahamian public as a means to resolve the Christie administration’s demands, as it did not want to “dilute” its stake. In fact, it wanted a greater equity interest in BTC
• The as-yet undefined agreement, where the Broadcasting Corporation of the Bahamas (BCB) will have access to “certain BTC resources has, according to Mr Wilson, the potential to save the former “a seven figure sum” annually.
• Based on valuations provided by Bahamian and London-based investment analysts, Mr Wilson said the value of the ‘just under’ 2 per cent stake to be placed in The BTC Foundation is between $25-$50 million.
• And Mr Wilson hinted that the ‘national security protocols’, which have to be worked out between CWC/BTC and the Government, are intended to aid the crime fight when it comes to communications-based evidence.

However, Mr Wilson readily agreed that the most important aspect of the deal between the Government and CWC was not included among the Memorandum of Understanding’s (MoU) details.

This is the ‘no change’ in the timetable for cellular/mobile liberalisation, arguably the most important segment in the Bahamian communications market, and which accounts for around two-thirds of BTC’s estimated $360 million annual revenues.

Mr Wilson confirmed that CWC had “absolutely” sought an extension to that lucrative monopoly as the price for giving up majority 51 per cent ownership, and control, of BTC.

“We went through the song and dance,” he told Tribune Business. “They started out requesting three years’ [extension], we negotiated and they said: ‘Listen, what about a year?’ It went right down to zero months.

“That was significant. We got all this, and they didn’t extend the extension.”

BTC was given a cellular monopoly designed to last three years post-privatisation, and this is due to expire on April 6, 2014.

This exclusivity was already extended once, from two to three years, by the former Ingraham administration at the time of privatisation, largely it was thought to induce CWC to pay a $200 million-plus price.

A three-year extension to the April 6 expiry would have taken BTC’s cellular monopoly through to 2017, and would likely have hindered development of both the communications industry and wider Bahamian market.

Ending BTC’s cellular exclusivity is the final piece in the communications industry’s liberalisation jigsaw, and extending it further would have deprived Bahamian businesses and consumers of the benefits that flow from competition - better prices, products, services and more choice.

Mr Wilson, though, described the original privatisation terms as “unfortunate”, as cellular competition will not immediately arrive come April 6.

Although, some including CWC itself, have suggested a second cellular operator will enter the market in 2014, Mr Wilson agreed with those who said it may not arrive until 2016 - as it will take a year to award the licence, and a further year for another carrier to build out its network infrastructure.

“You can’t start anything until then [April 6],” he added. “Prime Minister Christie has been so meticulous in honouring that, and making sure CWC doesn’t sue them for something they cannot do.”

Mr Wilson, meanwhile, also confirmed that CWC put the bar beyond the Government’s reach when it came to regaining Board control at BTC.

“When this came up, CWC said we’d have to expropriate it [BTC],” he told Tribune Business. “The Government would have had to do more than pay for it; they’d have had to go to Parliament and expropriate it, as CWC would not sell it.

“There was no price at which they’d sell it,” Mr Wilson added of BTC Board control “In addition to the consequences of expropriation, you’d have to pay the penalties the former government put in the agreement, $40 million.”

He acknowledged that the cost, and likely negative ramifications of a BTC renationalisation for the Bahamas’ investment reputation, meant this option was off the table.

‘The policy of non-expropriation of assets has been public policy in the Bahamas for centuries,” Mr Wilson said. “Why change something that has served the country so well, and pay a $40 million penalty for so little. It makes no sense.”

Yet in the same breathe, Mr Wilson said the shares being placed in The BTC Foundation were worth between $25 million and $50 million, based on valuations he had seen.

“S50 million is a lot of money,” he added, saying an unnamed Bahamian investment analyst had come up with this figure based on an annual $2 million dividend from BTC and 4 per cent rate of return.

The $25 million was detailed in a report by a London-based investment analyst, revealed by Tribune Business last week.

Elsewhere, Mr Wilson said there had already been meetings between senior BCB/ZNS management and top executives at BTC and CWC over how the former could benefit from their new arrangement.

“This is huge,” he added of a deal designed to “materially improve” ZNS’s programming. “The preliminary indications are that this could mean seven-figure savings for the BCB. This ain’t chicken feed.”

The BCB received $7 million in taxpayer subsidies this fiscal year, and any reduction in this sum will be welcome, but it is unclear exactly how this will be achieved.

Asked by Tribune Business whether an IPO of shares to the Bahamian public was among the options discussed by the committee and CWC, Mr Wilson said it was, but there were a “number of impediments to that”.

Observers, such as financial analyst Richard Coulson, had suggested that both the Government and CWC sell a portion of their BTC stakes - as envisaged by the former Ingraham administration - and do so in such a way as to achieve the Christie administration’s objectives.

Mr Coulson suggested an outcome where CWC ended up with 49 per cent, the Government 42 per cent and the Bahamian public 9 per cent, but that did not happen.

“The bottom line is that was not acceptable to CWC,” Mr Wilson told Tribune Business. “CWC was not interested in dilution; they wanted more.

“But it’s still within the purview of the Government to issue shares to the public. That is not lost.”

As for the security protocols yet to be agreed between CWC and the Government for BTC, Mr Wilson implied these would relate to the crime fight and the provision of electronic communications evidence in court.

Referring to the ongoing murder case in Jamaica involving dancehall artiste Vybz Kartel, which is being dominated by text message and cell phone video evidence, Mr Wilson said: “When you are communicating you are texting, e-mailing.

“The telco is in a position to know a lot about what you are doing. This will open up new levels of discussion about how do you balance people’s privacy with the law.”

He added that CWC had plenty of experience in this area, having worked with the UK government and operated in places such as Afghanistan.

Mr Wilson concluded by saying there was “going to be plenty of evidence” as to why the original BTC privatisation was a bad agreement, and said there was “no comparison” between the work of his committee and the former FNM administration.