The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Digicel would not have bid on the second mobile licence if it was unhappy with the Government’s insistence that the winner be 51 per cent majority Bahamian-owned, a senior executive saying it did not see this condition as “limiting”.

Frank O’Carroll, Digicel’s head of business development, told Tribune Business that the Christie administration’s ownership requirements were not inconsistent with the business model it had adopted in several other countries.

And, with Digicel still retaining management control of the new business should its bid prove successful, Mr O’Carroll said the ‘majority Bahamian ownership’ stipulation was not restrictive to its plans “in any way, shape or form”.

“We wouldn’t have put in a bid if we were not very, very happy with the rules of the game. We don’t see that as anything that limits the business,” Mr O’Carroll told Tribune Business of the ‘51 per cent’ requirement. “We applaud the Government’s decision to make those shares available to the Bahamian people.”

Several observers had suggested that the ‘majority Bahamian ownership’ condition might both reduce the number of bidders and value of the second cellular licence.

They questioned privately to Tribune Business why any bidder would go to the expense, time and due diligence of preparing a bid only to have to relinquish at least 51 per cent of the equity - and profits and dividends - if they were successful.

However, Mr O’Carroll reiterated of the ownership structure: “It’s not a unique model for us.

“There are other countries where we have minority ownership, Panama and Turks & Caicos. There are also other countries where we are a partner with the Government, so it’s a model we operate there.

“We don’t see the 51 per cent stipulation as limiting the business in any way, shape or form. The Government has made clear that the operator will be responsible for running the business, as it will have a management contract.”

With Digicel a tightly-held private company, headed by Irish entrepreneur Denis O’Brien, several persons had questioned whether it could stomach the ‘51 per cent Bahamian ownership’ standard. Mr O’Carroll’s comments, and the bid submission, now appear to lay those doubts to rest.

The Request for Proposal (RFP) document says the Government is offering to temporarily hold the 51 per cent stake in the second cellular licensee until it can determine the best method for placing this in the hands of Bahamian private investors.

With the winning bidder and the Bahamian ‘interest’ responsible for their proportionate share of the network build-out costs, it is possible that the Government might have to finance this until the equity is sold to local institutional and retail investors.

Given the state of the cash-strapped Public Treasury, it is likely the Government would have to fund its share from the proceeds of the cellular licence’s spectrum auction - until these can be repaid, and perhaps more, by selling its equity interest in the operator.

Mr O’Carroll added that the winning bidder, Digicel or otherwise, and the Government would have to immediately determine the second operator’s capital and funding requirements, whether this would be raised via debt, equity or a mix of both, and the business’s future direction.

“They’ve left all these options available to them. They’ve certainly been able to attract people to the process, and certainly been able to attract competent operators,” he told Tribune Business.

Among the options open to the Government in disposing of the 51 per cent equity stake in the new operator are a one-time initial public offering (IPO), where all the shares are sold. If the capital markets are unable to absorb that, a series of smaller offerings could also be undertaken.

Of Digicel’s two rivals for the second cellular licence, BISX-listed Cable Bahamas and Virgin Mobile (Bahamas), the former is well-placed to exceed the Government’s requirements because it is already 100 per cent Bahamian-owned.

This means it will likely score extra points in this category, when the phase one bids are evaluated by the Cellular Liberalisation Task Force and its committees.