The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable & Wireless Communications’ (CWC) top executive yesterday asserted that “public opinion is on our side” when it came to the Bahamas Telecommunications Company’s (BTC) privatisation, a survey having found that 84 per cent of Bahamian consumers backed the move.

In comments that are likely to reignite public debate surrounding BTC’s privatisation, and possibly infuriate the Government, Tony Rice said he did not see Prime Minister Perry Christie’s pledge to regain a majority stake in the telecommunications carrier as “a threat”.

Speaking to London-based analysts during a conference call to discuss CWC’s 2013 first quarter results, Mr Rice said he and Mr Christie had “agreed to look at” the issue of the Government regaining 51 per cent majority ownership during their meeting last month.

However, the CWC chief executive firmly indicated that negotiating away the majority equity holding in BTC was not his company’s priority.

Instead, CWC and its Caribbean regional affiliate, LIME, are focused on “convincing” Mr Christie and his Cabinet of their merits and virtues, in particular that they are doing “a good job” in the Bahamas.

Mr Rice said CWC was looking to emulate what it had achieved in the Maldives, where within six months of a general election it had convinced the new government - which had been talking about re-nationalising the national phone company, Dhiraagu - to sell it a majority stake in the company. Whether he will be able to achieve the same in the Bahamas is yet to be determined.

With Mr Rice emphasising that he did not see the Christie administration’s stance “as a problem” or deterrent to LIME’s long-term involvement in the Bahamas, CWC added that BTC had continued “running ahead of our post-acquisition plan” during the three months to end-June 2012.

Confirming that the high margins BTC had enjoyed during the second half of the previous financial year had continued into the 2013 first quarter, Mr Rice indicated it was CWC’s strongest Caribbean performer.

“BTC continues to perform well. We’re working with the new government there to improve infrastructure and the provision of services to Bahamians,” the CWC chief executive said.

Asked by a Citigroup analyst about the outcome of his meeting with the Prime Minister last month, Mr Rice told the conference call: “It was very cordial, it was long, it was friendly.

“He [Mr Christie] expressed all his wishes about what we need to do to deliver on the telecoms front, which are things on our agenda. We shared some of the things we’ve got in train, and he was pleased with that.”

As for the Progressive Liberal Party’s (PLP) pledge to regain majority equity ownership of BTC, an issue that has been troubling both analysts and CWC shareholders, Mr Rice indicated that while he was open to exploring the options, negotiations over what is effectively a 2 per cent stake were not the company’s main focus.

“What we agreed...... One of his election pledges was to look at the lawful means by which the Government could have a 51 per cent stake,” the CWC chief executive said. “He’s [Mr Christie] not talking about 100 per cent, he’s not talking about loss of management control.

“We’d agreed that we’d look at that, but the emphasis is on trying to convince him and his colleagues of the quality of the job we’re doing, and the importance of the job we’re doing. That’s a process we’re going to kick-off in the next couple of months.”

Mr Rice did not go into specifics on this strategy, and how CWC planned to “convince” Mr Christie and his government that they were better off maintaining the status quo.

Still, many observers have argued that attempting to renegotiate a deal such as the $204 million BTC privatisation - in the absence of any evidence to suggest wrongdoing or that the Bahamas got an egregiously bad deal - would send a very bad signal to current and potential foreign direct investment (FDI).

And, if the Government regained majority ownership, it would also potentially reverse liberalisation of the Bahamian communications market by making it owner, operator and regulator (despite URCA’s existence” once again.

Liberalisation has been seen as critical to innovation, and the development of new products/services and price competition, all developments vital to a services-based economy such as the Bahamas. This could all be stifled if the Government reclaimed BTC majority control.

Downplaying the consequences of the Government’s stance, Mr Rice said: “I don’t see it as a threat to the business or our presence there.

“We’re there to deliver for the Government and consumers of the Bahamas, and we’re already doing that. There’s tangible changes.”

Then, in remarks that may stoke the public and political fires, the CWC chief executive added: “We had a survey about how people felt about the privatisation of BTC, and I think 84 per cent of consumers, as I remember, said they thought it had been a very good and positive move.

“The side of public opinion is with us, but as always election pledges are made, and we need to make sure we convince them about the quality of the job we’re doing.”

“I have to say it was a very balanced and sensible discussion” with Prime Minister Christie, Mr Rice said. “I just think we need to get closer and closer in dialogue with the new government as, indeed, happens everywhere we go with a new government.”

Citing the Maldives example, Mr Rice said the leaders there “never regretted” selling a majority stake in the company to CWC because they had “seen what we deliver”.

“We need to make sure that we convince Prime Minister Christie and his colleagues that we’re going to do a similar job - and are doing a similar job - in the Bahamas,” Mr Rice emphasised.

“I don’t see it as a problem. It’s just one of those things we need to make sure we manage.”

The PLP, though, has a slightly different take on events, being noticeably more upbeat on the Government’s prospects of regaining the 51 per cent majority stake.

Party chairman, Bradley Roberts, said in a release that both the Government and CWC had nominated their respective representatives for negotiating the issue.

While CWC would likely retain management control at BTC with a minority 49 per cent stake, Tribune Business has previously been told that no communications carrier would be interested in such a holding, as shareholders and markets never give credit for anything other than majority control.

Under the privatisation agreement’s terms the Government is also likely to be liable for a multi-million dollar penalty should it amend the deal by regaining majority control.

Given the projected $550 million fiscal deficit, that would not be a welcome development, and observers have advised it to focus its attention elsewhere rather than divert time, money and resources to its BTC obsession.

Former Prime Minister Hubert Ingraham said the Government should instead look to raise revenues, estimated at $37 million, by selling off a 9 per cent tranche if BTC shares via an initial public offering (IPO) to Bahamian investors - something his administration planned to do. He also suggested that the Government was not serious in its intent to regain majority control, and would likely drop the issue quietly.

Meanwhile, Mr Rice said yesterday that the Bahamas, with its “American tourist-driven traffic”, was “performing much more strongly in GDP terms, and therefore business terms” than most of LIME’s other Caribbean territories.

Describing the Caribbean from CWC/LIME’s perspective as “a patchwork quilt” and “two speed business”, with some jurisdictions performing well and others not doing so good, Mr Rice said a cost savings plan was aiming to reduce regional headcount - outside the Bahamas - by 10-12 per cent.

He added that “in the case of the Bahamas”, BTC was performing “strongly”. This was backed by a CWC statement, which said BTC’s post-privatisation restructuring was “continuing to deliver”.

“BTC in the Bahamas is now in its second year with CWC, and we are running ahead of our post-acquisition plan,” CWC added.

“The business continues to deliver solid progress in its financial performance, together with much improved service and product offerings to its customers.”

The remainder of LIME’s Caribbean business was not nearly as encouraging, as regional cellular subscriber numbers dropped by 1.7 per cent during the first quarter - falling from 1.517 million to 1.491 million. Compared to the last quarter of the 2012 financial year, monthly average revenue per cellular subscriber fell from $29.3 to $28.3.

It was largely the same picture with LIME’s fixed-line and broadband businesses. Fixed-line subscribers fell by 5,000 to 714,000 during the quarter, although average revenue per subscriber rose from $33.3 per month in the previous year’s quarter to $35.4.

On broadband Internet, subscriber numbers dropped from 225,000 to 221,000, and average monthly revenue per subscriber from $412.4 to $41.7.