The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Financial advisers are racing to minimise any Government involvement in the ‘HoldingCo’ that will own the Bahamian people’s 51 per cent interest in the second mobile operator by ensuring its formation coincides with the licence’s issue.

Gowon Bowe, the PricewaterhouseCoopers (PwC) Bahamas partner, told Tribune Business that a “considerable amount” of work had already been done in developing HoldingCo’s governing documents and soliciting potential investors.

He acknowledged that HoldingCo’s creation had to be ‘in step’ with the Government’s goal of issuing the second mobile licence by year-end 2015, so that its share of the financing for the network infrastructure was in place for its partner (likely Cable Bahamas) to move.

PwC is the Cellular Liberalisation Task Force’s adviser, and Mr Bowe said the approval of Cable Bahamas’ business plan for ‘NewCo’, the second operator, also had to “work in tandem” with getting Bahamian investors to buy into HoldingCo.

Much work thus remains to be done before mobile liberalisation, and Cable Bahamas’ securing of the second mobile licence, becomes reality. All parties - PwC, Cable Bahamas and the Task Force - are effectively juggling a number of balls that need to be caught at the same time for everything to work smoothly.

“The quicker we get all of the shareholders and funds in place, then the least involvement the Government has in the process,” Mr Bowe told Tribune Business. “We are mindful that people are anxious to have it up and running as soon as possible.

“The objective is certainly to have HoldingCo and its investors in place, or in transit to being in place, at the time the licence is issued, so the Government does not have any activity or role in this process.”

The original Request for Proposal (RFP) seeking bids for the second mobile licence seemed to make HoldingCo’s creation more cumbersome by offering the Government as the initial “sole shareholder” of NewCo if this will help facilitate the share transfer to private investors.

“In order to facilitate the timely formation of NewCo and commencement of operations, the Government’s primary role will be to facilitate the immediate transfer of shares to Bahamian private investors at the time that HoldingCo is formed,” the RFP said.

“However, the Government’s shareholding in HoldingCo would only be temporary in nature, pending an offering of the shares in HoldingCo to eligible investors.”

Few private sector companies would want the Government as fellow shareholder, especially one that wants to move as quickly as Cable Bahamas does, especially given the mobile network roll-out timetable.

Mr Bowe’s comments, though, indicate that PwC and the Task Force are doing everything in their power to prevent such a scenario of government involvement from materialising.

He added, though, that the Government had to “guarantee” to Cable Bahamas that HoldingCo would have the funding in place to match its share of the network infrastructure build-out costs.

While Cable Bahamas and HoldingCo will be responsible for start-up and initial capital costs in proportion to their shareholdings, the two sides will have to agree “projected capital injections” for each roll-out phase prior to the licences being issued.

The two sides will then finance these in proportion to their shareholdings, but the Bahamian investors in HoldingCo will have to agree to finance this via debt.

Cable Bahamas, the winning bidder, will hold a 49 per cent equity stake in NewCo operating company, and enjoy Board and management control.

But the speed with which Cable Bahamas’ licence is affirmed, and awarded, not to mention how rapidly it launches services, will depend to a great extent to how fast the Government and its Task Force move.

The next step has to come from them and PwC, as they both have to find the investors for - and formally structure and set up - HoldingCo.

Until that occurs, and the latter’s Board of Directors are appointed, it will be impossible for Cable Bahamas (and NewCo) to establish and formalise the Shareholders Agreement and other aspects of their relationship with HoldingCo.

Mr Bowe, though, told Tribune Business that much of the formal documentation necessary to incorporate HoldingCo had already been developed.

“A considerable amount of that work has been done,” he said. “HoldingCo, as it relates to its controlling documents, has been in the works throughout the summer months - its Memorandum and Articles of Association, and other control documents and agreements on how it will operate.

“It’s now really a case of how to sensitise or socialise, if you will, potential investors, which we have already started doing. The underlying statutory documents that govern the operations are the key, and we’ve been working towards that.”

Mr Bowe expressed hope that the investor ‘sounding’ process conducted to-date would ensure “commitments and cash contributions” for injection into HoldingCo materialised between now and the licence award.

He acknowledged that HoldingCo’s creation and capitalisation needed to have a “similar” timetable to that for the licence award, so that the necessary investment was ready to go.

And potential investors needed to have access to Cable Bahamas’ financial projections for NewCo, so they had all the necessary information to make an educated investment decision.

Mr Bowe reiterated that HoldingCo is intended to be more than just a vehicle to hold a 51 per cent majority stake in a mobile operator. He explained that it will be used to invest in public-private partnerships (PPPs), and other key infrastructure projects and assets.

Emphasising that HoldingCo could spur further capital markets activity, he added: “If we can strike the balance, there’s a wonderful opportunity to provide sunshine through the clouds that may turn our fortunes, as opposed to relying on foreign direct investment (FDI).”