The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading Government negotiator yesterday suggested Cable & Wireless Communications (CWC) may not necessarily need to retain a majority 51 per cent stake in the Bahamas Telecommunications Company (BTC) to consolidate the latter’s performance in its overall financial results.

CWC’s reluctance to cede any ground to the Government in its bid to regain majority ownership is thought to be driven, at least partly, by the accounting requirement that subsidiaries can only be consolidated in the parent’s accounts if the latter retains an equity stake greater than 50 per cent.

But Franklyn Wilson, the Sunshine Holdings and Arawak Homes chairman, and a chartered accountant by profession, told Tribune Business that this accounting rule was “not necessarily as black and white” as some thought.

Agreeing that he and other government negotiators were “aware” of the accounting ‘consolidation’ rules and treatment, Mr Wilson told Tribune Business: “I’m trained as a chartered accountant myself, and I’ve spoken to a number of accountants from inside and outside the country, who are very familiar with the rule of consolidation.

“My understanding is the rule is not as simple as that. We are presuming it is possible to come to an arrangement that is consistent with the rules.”

He added: “We’re aware of what has been said, but the accounting rules, as I understand it, are not necessarily as black and white as stated.”

CWC, and its Caribbean regional affiliate, LIME, have previously given coded warnings as to what will happen should they lose majority control at BTC.

Tim Pennington, CWC’s chief financial officer, in a previous conference with financial analysts, said the carrier either sought to gain majority control in businesses it was invested in, or deployed capital elsewhere.

CWC has minority stakes in several telecommunications carriers, including its interests in Trinidad & Tobago, and Mr Pennington’s remarks implied that if it lost control at BTC, its investment in - and interest in - the company and the Bahamas would wane. It is unable to consolidate the results in Trinidad in its financial accounts.

Meanwhile, Mr Wilson said the Government’s negotiating team was “prepared” for CWC to insist that the criticisms related to the June 18, 2012, network outage not be included in their discussions.

“We are, of course, aware of these findings, and no doubt I would expect that during the course of our discussions, CWC will offer further thoughts on it and seek to persuade us that it ought not to be factored into our talks,” Mr Wilson told Tribune Business.

“We expect that, and are preparing on that basis.”

He added that negotiations between the Government and CWC were expected to resume later this month, and said: “We’ll try to work it out.”

Apart from Mr Wilson, the Government’s negotiating team include former attorney general Sean McWeeney; ex-Ministry of Finance legal advisor, Rowena Bethel; and former BTC chief executive, Leon Williams.

In relation to the June 18 network outage, the Utilities Regulation & Competition Authority (URCA) found BTC breached a key condition of its licence, levelling implicit criticism at majority shareholder CWC.

It said the causes ultimately lay with BTC - a lack of “preventative maintenance” and a failure to provide for adequate redundancy and contingencies in its network design.

The communications industry regulator also issued a thinly-veiled criticism of CWC and its LIME regional affiliate, saying BTC knew it had “limited geographic redundancy” in its network since April 2011 - the date when it was privatised, but failed to correct them.

“There was no evidence in the preventative records submitted by BTC to URCA of processes and procedures to sufficiently test and maintain back-up batteries, nor were there measures to address generator and automatic transfer switch faults,” the regulator said

“The failure of BTC’s entire bank of batteries, the generator and automatic transfer switch hindered the restoration of power to the Technical Complex and services to the public.”

And URCA added that prior to June 18, 2012, BTC had no business continuity plan - something vital to ensuring the continued, uninterrupted operations of a company. Given BTC’s vital role as a communications infrastructure provider, business continuity is essential.