The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading private sector executive yesterday urged the Government to consider opening up the cellular liberalisation process to other bidders, given that it had not seen the desired level of competition.

Edison Sumner, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chief executive, while welcoming the resumption of the cellular licence bidding process, said there was enough cause for the Government “to examine” whether other players should be admitted “at this late stage”.

Confirming that his company, IP Solutions International (IPSI), elected not to bid due to “challenges” with the conditions set by the Government, Mr Sumner said he was “not taking anything away” from the two remaining participants - Cable Bahamas and Virgin Mobile (Bahamas).

Yet he suggested that the Government “take a step back” and consider whether to admit other participants to the process, adding that it had expected at least five bidders to make it through to the spectrum auction that forms the process’s second round.

Mr Sumner also expressed doubts over whether the Government would issue a third cellular licence - something it has the ability to do come 2018. Yet many observers believe the Bahamian cellular market, with its 350,000-strong population, are not strong enough to support three players.

Backing the Government’s move to resume the second cellular licence bidding process, Mr Sumner, speaking as BCCEC chief executive and not for IPSI, said: “We weren’t sure what was happening over the last few months when the Cellular Liberalisation Task Force went very quiet.”

The Utilities Regulation and Competition Authority (URCA) restarted the second phase on August 19, with the spectrum auction set to take place later this month.

The Government and Task Force, in a statement, blamed the nearly four-month delay on URCA’s investigation into Cable Bahamas’ construction of several communications towers throughout New Providence.

The probe resulted in a public row between Cable Bahamas and URCA, with the BISX-listed company arguing that the towers were for the delivery of wireless broadband (Internet) services and that the regulator was blocking competition and improved communications.

URCA, though, is likely to have been concerned that Cable Bahamas was trying to get a ‘jump start’ on its cellular infrastructure roll-out obligations via the tower construction - something that would have compromised the integrity of the liberalisation process.

“Subsequently, URCA advised the Task Force that matters arising in the investigation had the potential to impact the selection process, and that it was advisable to postpone phase two of the selection process pending their full consideration and determination,” the Government said.

“In accordance with phase two under the Request for Proposals (dated 13 November 2014) and the Auction Rules, URCA concluded that Cable Bahamas committed a breach of the Auction Rules that did not warrant disqualification from the process.

“Cable Bahamas has, however, incurred a financial penalty in accordance with the Auction Rules, and Phase two of the process has resumed.”

Several sources suggested this was a compromise solution, with Cable Bahamas not disqualified from the process, but forced to pay a small fine. And URCA could justify its investigation via the findings and levy on the company.

David Burrows, Cable Bahamas’ senior vice-president of marketing, declined to comment on the Government statement other than to say the company was “happy” the process had resumed and that it was still in contention.

The Government and Task Force, though, gave no timelines for when the spectrum auction would be completed or the preferred bidder announced.

It appears likely, though, that the winning bidder will be announced before year-end, a deadline several months past the Government’s May target.

But Bahamian consumers will have to wait until next year for it to launch services - something that will effectively give the Bahamas Telecommunications Company (BTC) and its owner five years of cellular monopoly.

Once the preferred bidder is determined by adding together the scores from the two liberalisation process rounds, the new operating company will be formed, together with the holding company (HoldingCo) that will hold majority equity ownership in it on behalf of the Bahamian people.

Mr Sumner, meanwhile, said the Bahamian private sector had hoped “there would be more than two companies involved in the process at this stage”.

Arguing that greater competition would have resulted in better offers that benefited Bahamian consumers and the economy, Mr Sumner told Tribune Business: “We don’t have the depth of the competitive environment we would have hoped.”

He added that Digicel’s withdrawal after the first bidding round, together with the non-participation of other regional and more Bahamian players, had weakened the process.

“The fact only two bidders made it through this process and other serious contenders, for whatever reason, dropped out, should give the Government cause to examine this process again and see if it wants others to participate at this late stage,” Mr Sumner said.

“A greater number of participants creates a better level of competition, and a better chance to get good quality responses.”

He added that Cable Bahamas was a known, 100 per cent Bahamian-owned commodity, with an established track record in providing all communications services bar cellular.

Little was known about Virgin Mobile (Bahamas), although Tribune Business has previously revealed that John Gregg, a member of the ill-fated Bluewater bid for BTC, is a key player in it. This bid includes the Bahamian group formerly known as Junkanoo Mobile, and is represented by Anthony McKinney at McKinney, Turner & Co.

“It would have been good to have had more companies in the process bidding for a licence,” Mr Sumner reiterated.

“We [IPSI} had challenges with the process. But the Government may want to consider, at this stage, if they are not satisfied with the level of responses gained - they have two bids remaining, when I know they expected at least five - taking a step back and inviting more companies in to bid on the licence.”

He acknowledged that it might be “too far gone” for the Government to consider doing this, an action many would likely consider highly irregular.

Opening up such a formal tender process so that new bidders can enter at a later stage would prompt howls of protest from Cable Bahamas and Virgin Mobile (Bahamas), who have complied with all the set requirements, and would likely take legal action over such a move.

New bids could only be invited if the formal tender process was over and the Government had rejected all offers, as seemingly happened with the BTC privatisation when Cable & Wireless Communications (CWC) was brought in without participating in the initial Request for Proposal (RFP).

Mr Sumner, meanwhile, said he was “not entirely convinced” that the Government will ever issue a third cellular licence for the Bahamas.

He previously told Tribune Business that IPSI elected not to bid because some of the conditions set by the Government were “too onerous”.

He added that IPSI had expressed reservations over the winning bidder having to relinquish a majority 51 per cent equity stake in the second licensee prior to the bid documents being released.

He said other potential bidders also indicated to IPSI they had difficulty with the ‘ownership’ requirement set by the Government, while the network roll-out targets were also viewed as “aggressive” and requiring more time.