The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company’s (BTC) $56 million capital investment spend for this year is its largest ever, as it moves to address dropped mobile calls and prepare for this market’s full liberalisation.

Both Prime Minister Perry Christie and Phil Bentley, Cable & Wireless Communications (CWC) chief executive, were at pains to talk up BTC’s capital investment programmes as they marked the closure of their ‘2 per cent’ compromise deal.

Mr Christie described BTC’s $56 million capital development budget for this year as the “largest single” one ever, while Mr Bentley, as head of the company’s controlling shareholder, broke down how it planned to invest a total $170 million over the next three years.

More than one-third of this sum, over $60 million, will be spent on new cellular sites and upgraded radio signals, as BTC moves to both address existing network capacity bottlenecks and dropped calls as the carrier prepares for cellular market liberalisation.

Another $8 million has been earmarked for back-up power generation, in a bid to prevent a repeat of the previous BTC network outage, while $40 million will go to upgrading the carrier’s broadband Internet and fibre network so “young Bahamians can download their favourite songs in just three seconds”.

Mr Bentley added that $25 million would be invested in multi-protocol label switching targeted at Bahamian business customers, while also pledging that BTC would start trialling its long-awaited Internet Protocol (IP) TV service by December 2014.

His address, at the BTC Foundation’s launch, also carried a message for both the Government and Its Bahamian cellular customers.

While the latter were implored not to desert BTC for its first cellular rival whenever competition arises, Mr Bentley also made some pointed remarks about the need for the Bahamas to offer a conducive investment environment that outshone its Caribbean rivals.

The recently-approved Communications Sector Policy contained commitments to make the Bahamas a regional hub for the industry, attracting technology parks and inward investment, but the CWC chief executive said all its Caribbean territories were targeting this goal.

“So, here’s the issue. As a businessman, accountable to my shareholders, I simply can’t make the same amount of investment in every market. So, where will we invest as Cable & Wireless?” Mr Bentley asked.

Listing his investment climate requirements, he focused on “fair regulation” and companies having the ability to import specialist labour vital to their workforce requirements, with Bahamians simultaneously trained in these skills.

“Nothing does more to shatter confidence than unfair regulatory rulings,” Mr Bentley said. No specific reference was made, but this may be interpreted by some as a swipe at the recent $243,242 fine levied on BTC by the Utilities Regulation and Competition Authority (URCA), after it found the company had broken the law and engaged in anti-competitive behaviour through its ‘exclusive’ phone card supply agreements with wholesalers, excluding rivals from up to 60 per cent of the market.

After lobbying for a reduction in import duties on smart phones, Mr Bentley said CWC needed “flexibility” to engage specialist labour, praising immigration minister Fred Mitchell for “getting the required skills on to the island”.

This gives a further indication of both the increasingly close relationship between the Christie administration and CWC, and the previous issues the latter and BTC had in obtaining work permits for specialist staff.

Well-placed Tribune Business sources said BTC had been granted just one work permit in the past three years, confirming previous indications that it was experiencing “big time hassles’ in this area as the Christie administration made clear its displeasure with both CWC and the 2011 privatisation.

The same sources suggested Mr Bentley and CWC had decided to snuggle up as closely as possible to the Government to “protect” their investment in BTC, which accounts for 24 per cent of the group’s total business and is its second largest market after Panama.

Leon Williams’ main role as BTC chief executive is to “manage the relationship” with the Government, they added, with CWC hoping to influence and “delay” cellular liberalisation and the award of a second, rival licence.

This would both threaten BTC’s contribution to CWC’s overall results, given that cellular contributes two-thirds of its revenues, and its ‘propping up’ of the rest of the Caribbean.

Some sources have already suggested that the Government-appointed Task Force overseeing the cellular liberalisation process has been aiding CWC in this objective by ‘dragging its feet’ in starting the licence auction.

Yet Mr Christie effectively rejected such interpretations on Friday, arguing that the 2011 privatisation terms were such that the Government could make no move - not even appoint a committee - on cellular liberalisation until after the three-year exclusivity period expired on April 6 this year.

Delaying cellular liberalisation would also contradict Mr Christie’s public statements, in which he has urged URCA and his government to move as rapidly as possible in introducing competition to the Bahamian cellular market.

Yet with the liberalisation process yet to launch, and it now September 2014, it is unlikely that a second cellular operator will begin services before early 2016. This gives BTC/CWC another full financial year (this ends on March 31 for both companies) of cellular exclusivity, and possiby two.

Meanwhile, without explicitly saying so, the ‘Questions and Answers’ on the 2 per cent BTC Foundation deal, produced by Franklyn Wilson, head of the Government-appointed negotiating committee, illustrate just how the deal is a compromise that allows both sides to achieve their key objectives (or at least spin it as such).

While the Government can argue that the 5,093,200 non-voting shares placed in the BTC Foundation give it close the ‘Bahamian people’ close to a 51 per cent stake in the carrier, the information makes clear CWC remains the largest shareholder with Board and management control.

CWC has 125,785,440 shares in BTC, giving it a 49.008 per cent stake compared to the Government’s 49 per cent. Thus its extra 80 shares, and the fact the BTC Foundation is non-voting, enables it to consolidate BTC’s results in its accounts - the key CWC objective.

With CWC refusing to sell any of its shares, the Government would have been forced to “expropriate” these via an Act of Parliament without the BTC Foundation deal.

Apart from costing the Government a $40 million penalty as per the privatisation deal terms, Mr Wilson’s notes said this would also have forced a change in centuries-old government policy of non-expropriation.

What was not mentioned explicitly was the damage such a move would have done to the Bahamas’ international investment reputation, Mr Wilson’s notes merely saying: “The committee did not deem it to be in the national interest to recommend a change to that national policy.”