The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Foreign investors are unlikely to be deterred by the Government’s efforts to renegotiate the Bahamas Telecommunications Company’s (BTC) privatisation because the sales process was “flawed”, a former finance minister told Tribune Business yesterday.

James Smith, a former Central Bank governor who is now a key Ministry of Finance consultant, said the sale of a 51 per cent majority equity interest in BTC to Cable & Wireless Communications (CWC) did not fit the “standard privatisation model”, and suggested knowledgeable investors would recognise this.

Describing the BTC deal as “a special case”, Mr Smith effectively said the sales process was undermined because CWC was not among the initial entities who responded to the Government’s request for bids.

Those who did entered a so-called ‘beauty contest’, where their offers for BTC were compared and matched to the Government’s own expectations, but CWC did not participate in this - only entering the process at a later date.

Asked whether the Christie administration’s decision to renegotiate the privatisation terms with CWC could negatively impact investor perceptions of the Bahamas, Mr Smith replied: “It’s difficult to say, but you must recall that BTC was not your regular kind of privatisation in the sense that when the exercise was conducted initially a number of carriers were involved.

“They submitted their bids, and CWC were not at the table reportedly. While those other guys were waiting for the results of their bids, discussions were taking place with CWC who were not at the table. It seems to have been negotiated privately.”

Mr Smith told Tribune Business that this meant the BTC situation was totally different to Argentina, which recently come under fire for its decision to re-nationalise an oil company majority owned by Spain’s Repsol.

“The process involving this one [BTC} would appear on the surface to have been flawed,” the former finance minister said.

“If it was generally known that is what is being corrected, that would take on a different meaning to people examining the Bahamas.”

Suggestions that CWC entered the BTC sales process by the ‘back or side door’, and that the Ingraham administration and its privatisation committee were conducting two separate, parallel negotiating processes have been made before.

David Shaw, chief executive of CWC’s Caribbean regional arm, LIME, told Tribune Business in early 2011 that the company was not among those who entered the ‘beauty contest’ bidding because it was, at the time the process was launched, focused on restructuring its existing businesses.

Once this was completed, CWC/LIME then approached the then-Government to see if there was any possibility it could become involved in the privatisation process.

Julian Francis, head of the privatisation committee, in a previous interview with this newspaper effectively refuted Mr Smith’s concerns.

He said the committee, and the Government, only started talking to CWC after they failed to reach a deal with the two leading bidders, One Equity Partners/Vodafone and the Atlantic Tele-Network/CFAL combination.

Still, Mr Smith suggested that foreign investors would be able to ‘read between the lines’ in assessing the Christie administration’s BTC position, and would not be discouraged from looking at the Bahamas as a safe place to invest their capital.

He added that the terms reached with CWC also breached the consensus reached on BTC’s privatisation by the two major political parties a decade before, with the deal almost being an “in your face” response to its opponents.

“When the process started a decade ago, both political parties agreed that privatisation was the way forward, and that the Government would retain 51 per cent. That changed at the last minute,” Mr Smith told Tribune Business.

“The history and circumstances surrounding this one [BTC} make it a special case.”

He added that he “doubted” whether the Christie administration’s stance would impact foreign direct investment levels, and said investors were “likely to see it does not fit the standard privatisation model.

“Normally, consideration should have been given to some kind of objective review by a credible outside agency, which would do an audit and see if it met the standard for privatisation,” Mr Smith added.

Given the opposition and demonstrations that took place over the CWC deal, Mr Smith said the process “should have been handled differently” with all stakeholders brought into the fold. When this did not happen, the BTC privatisation became “an almost in your face kind of thing”.

He tacitly acknowledged, though, that the Government’s election campaign pledges and subsequent public statements meant it had little choice but to try and achieve something in talks with CWC over BTC.

“The thing about governments is that once hey put things in train during the political process, they tend to be held to it. That determines their priorities more than anything else,” Mr Smith added.

James Smith