The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former state finance minister yesterday blasted as “utter rubbish” his predecessor’s assertion that the Bahamas Telecommunications Company’s (BTC) privatisation was “flawed”, and warned that “the big prize” - communications sector liberalisation - was now under threat.

Zhivargo Laing, responding to a Tribune Business interview in which James Smith raised concerns over how Cable & Wireless Communications (CWC) entered the privatisation race, said the Ingraham administration did not commence talks with the company until all other bidders had been rejected.

Implying that Mr Smith was involved with a “less transparent” process, namely the first Christie administration’s negotiations with Bluewater Communications Holdings, the FNM Senator suggested the Government’s attempt to regain a majority 51 per cent stake in BTC was “almost hopeless”.

Explaining that the former government had to offer majority ownership to get global telecommunications players interested in BTC, Mr Laing suggested CWC might walk away from the Bahamas if it was relegated to a minority equity stake.

And he warned that communications liberalisation would be “entirely at risk” if the Government regained majority ownership at BTC, as it would then be less willing to allow competitors to undermine the value of its asset.

A major concern is the planned liberalisation of the cellular/mobile market from 2014 onwards, as this is the sector BTC derives two-thirds of its turnover from - a monopoly that has effectively kept the company afloat.

If it regains majority control, the fear is the Christie administration might think twice about cellular market liberalisation and put a brake on competition, something Mr Laing said would cause the Bahamian economy “to lose out”.

Tackling Mr Smith’s assertions, the FNM Senator told Tribune Business: “The suggestion by him that there was some flaw in this process, based on us having privatisation discussions with CWC at the same time as the other process, entirely inaccurate and utter rubbish. No such thing occurred.

“There were no discussions with CWC prior to our determination that the two bids we were looking at were absolutely unacceptable to the Government.”

Four bidders - the One Equity Partners/Vodafone combination, the Atlantic Tele-Network/CFAL consortium, Trilogy International Partners and Digicel, made it through the initial vetting to the offer process proper.

Of those four, only the former two remained in the process, and Mr Laing’s position is that the former government only approved talks with CWC to start once those groups were finally rejected.

“Once we determined they did not meet the criteria the Government had, they were unacceptable, only then did we say to the privatisation committee that they could go ahead and begin discussions with CWC, which had expressed an interest in the process,” Mr Laing added.

He contrasted the FNM’s process with the first Christie administration’s efforts to sell BTC to Bluewater, which he described as “a shell company”, in a deal agreed just days before the May 2007 general election.

Noting that Mr Smith, as then minister of state for finance, would have had a role in the Bluewater talks, Mr Laing added of that deal: “The Cabinet of the Bahamas, the full Cabinet, seemed to know nothing about it, and the then-Prime Minister himself was not even present when the deal was voted on.

“It seemed to have been, from what I could gather, a deal being led by a few ministers. From what could be ascertained, in the end the Cabinet agreed it, but there were a lot of things about it that just didn’t seem right.”

Contrasting the Bluewater and CWC processes, Mr Laing said there was no chance investors could be deterred by the latter, as it was more transparent.

“If investors could not be put off by the Bluewater process, but be put off by a more transparent process, then I cannot explain that,” he told Tribune Business.

“If Mr Smith wants to try and provide some hope in this almost hopeless process which the Government is entering into, the negotiations for buying back the majority of shares, that’s one thing, but he doesn’t have to do it by providing information that is inaccurate.”

Explaining just why it would be “very difficult” for the Christie administration to regain a 51 per cent equity stake, Mr Laing said no major communications player - be it CWC or another company - wanted to be minority owners.

“I don’t believe any strategic international partner is going to want to remain in that arrangement as a minority owner,” Mr Laing said of BTC.

“The reason why we offered the majority interest in the first instance is because the market had changed. To even get people interested, we had to offer the majority holding.”

Companies such as CWC are reluctant to accept minority ownership because this means they are unable to include the asset in their consolidated financial statements, and never get due credit from their shareholders and the markets for the investment.

Noting that the Government was asking CWC to go from a majority to minority equity stake with BTC, Mr Laing said: “The question for any shareholder would be why, and to go back to being a minority shareholder with government, when we’re in a world where privatisation has become the normal thing to do, and the more effective thing to do in terms of managing assets like telecommunications.”

The FNM Senator, though, said biggest drawback from the Government’s stance, at least as far as the overall Bahamian economy was concerned, was what could happen to the communications industry’s further development.

“Liberalisation is entirely at risk,” Mr Laing told Tribune Business.

“The reality is this. Privatising BTC was an effort we made to protect and preserve that asset in the event of the ultimate liberalisation of the communications sector, which is the one thing that’s going to offer big gains to the Bahamian public.

“That’s the big prize; when we liberalise, modernise and compete, we drive better products, services and prices as well.”

He pointed out that privatising BTC, and with a strategic partner such as CWC, would help the company “survive” in that competitive environment.

“If the Government takes majority ownership and becomes the primary owner again, any risk of a competitive environment undermining that asset would mean the Government is less inclined to foster that environment,” Mr Laing said.

“If the Government regained majority ownership, liberalisation in the near and medium term would be at significant risk. That’s where the public and economy of the Bahamas would lose.

“They [the Government] should really look at what needs to be done in the future to make telecommunications work for the Bahamian public and economy of the Bahamas.”