The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE Prime Minister's stated intent to reclaim majority ownership of the Bahamas Telecommunications Company (BTC) sends a "very concerning message" to the Bahamian and international business community about the "validity of contracts" they enter into with the Government, a senior private sector official has warned.

Speaking after Mr Christie last week confirmed that his administration would "explore all lawful means" to regain a majority equity stake in the recently-privatised carrier, Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chief executive, said it would have been better for the Government to negotiate quietly behind the scenes until there was "something to hold on to", rather than came out with huge public fanfare.

Focusing on several key issues to emerge from the 2012-2013 Budget during an interview with Tribune Business, Mr Rolle said the Government's objective of regaining majority ownership in BTC could undermine investor - especially foreign investor - confidence in the sanctity of contractual agreements reached with the administration.

During his 2012-2013 Budget presentation, the Prime Minister said: "We remain faithful to our commitment to explore all lawful means by which majority ownership of BTC can be restored to the Government and the Bahamian people.

"We will very shortly arrange a timetable for discussions that we propose to undertake in this regard with the present owners of the majority stake in BTC and other interested stakeholders."

"That whole comment is very concerning," Mr Rolle told Tribune Business, "because of the message it sends to the international community as to the validity of contracts in the country.

"If we're not careful, we may find that when the next [World Bank] Ease of Doing Business Report comes out, that may negatively impact" the Bahamas' ranking.

The BCCEC chief executive said the impression given to existing and potential foreign investors - that a change in government in the Bahamas could lead to previous agreements being substantially revised or torn up - could make the job of Khaalis Rolle, minister of state for investments, that much harder.

"One has to look at it from a business perspective," Winston Rolle told Tribune Business. "If these kinds of position are taken by the Government, what then is the rest of the business community likely to interpret as the kind of business we want to conduct in the country?"

Just to ensure he was understood on his BTC position, Mr Christie said in a post-Budget press conference: "With respect to our approach to it, it was important for me to say that the PLP has not changed its position. We have not retreated from it, and we will move forward on it and, therefore, we have to take what is said as a literal understanding; that we intend to, at the earliest convenience, initiate discussions with the ownership of the majority shares in BTC, with a view to the ultimate objective of recovering what would enable us to have the majority interest on behalf of the Bahamian people."

Mr Rolle, though, said the Government should have initiated talks quietly with BTC's 51 per cent majority shareholder, Cable & Wireless Communications (CWC), rather than go public with its intent before any discussions had begun.

"There's nothing to prevent them from exploring to see if there's some opportunity, but if there's no opportunity, then it's better left alone," he explained. "It would have been better served if they had explored opportunities, and the say they're talking at such a time as there was something to hold on to."

CWC is unlikely to willingly cede majority control, and settle for a minority 49 per cent stake in BTC. Especially since Tribune Business understands it believes the privatisation agreement gives it full protection against such a move.

While the difference between 51 per cent and 49 per cent may seem like semantics, especially if CWC was to retain Board and management control, various sources involved with the BTC privatisation have previously told Tribune Business it would have been impossible to attract a buyer had just a minority stake been on offer.

Shareholders and the markets never give communications operators any credit for minority assets they do not control, and giving up its majority stake would also force CWC to change its accounting treatment of BTC in its annual financial statements.

BTC has also become a key asset for CWC and its Caribbean regional affiliate, LIME, its $91 million in operating income accounting for "pretty much all of the uplift" in its parent's financial results for the year to end-March 2012.

Ultimately, the Government's intention to revisit, and renegotiate, the BTC privatisation, could force investors eyeing the Bahamas to factor in 'political risk', and the impact of a change in administration, on their business plans and potential investment return calculations. This they have never had to do before.

Some observers, though, will argue that the 'political risk' trend began with the former Ingraham administration, and its alleged 2007 'stop, review and cancel' policy in relation to contracts left in place by the first Christie government.

The Ingraham government denied this, pointing out that many of the contracts referred to were not complete when they came to office. Yet the notion was picked up by Standard & Poor's (S&P), and previous agreements with investors such as Baha Mar and the I-Group were also amended.

However, CWC is in a different position from those contracts subject to the so-called 'stop, review and cancel'. For more than a year, since April 6, 2011, it has been operating in good faith under a completed privatisation agreement with the Bahamian government.

Still, it appears that CWC chief executive Tony Rice may have been somewhat optimistic in his assertion that the company did not "anticipate significant problems" with the newly-elected Progressive Liberal Party (PLP) government.

As recently as May 24, 2012, he was telling London-based analysts that "sometimes you have to look a bit beyond the political rhetoric" in relation to the PLP's and Mr Christie's previous comments, suggesting that what politicians said in Opposition, then did in government, often turned out to be two different things.

Mr Christie's Budget statement, and public position, says otherwise. Mr Rice's planned meeting with the Prime Minister in two weeks' time is likely to be interesting, to put it mildly.