The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Cable Bahamas and the Government’s mobile liberalisation team are working “at high frequency” to ensure the second operator can launch early in 2016, and believe they are well-placed to attract investors for the majority 51 per cent ownership interest.

Gowon Bowe, the PricewaterhouseCoopers (PwC) Bahamas accountant and partner, told Tribune Business yesterday that recent Government bond issues had shown there was sufficient banking sector “liquidity” to finance the placement of shares in ‘HoldingCo’.

That is the entity which will hold a 51 per cent equity stake in the new mobile operator, ‘NewCo’, and Mr Bowe said it was in a “decent position” to find investors based on “soundings” to-date.

The PwC accountant, who is one of the Cellular Liberalisation Task Force’s financial advisers, said HoldingCo’s shares would be placed via a Private Placement of shares in the Bahamian capital markets.

This offering will only be available to select, or targeted, institutional investors and, unlike initial public offerings (IPOs), retail or individual Bahamian investors cannot access it.

Mr Bowe explained the private placement model was chosen because HoldingCo’s ‘start-up’ nature made it an unsuitable investment for retail investors, due to the uncertainty over its future financial performance.

He added, though, that by targeting the likes of pension funds, credit unions and domestic mutual (investment) funds, the Task Force would ensure broad Bahamian ownership of HoldingCo.

Acknowledging that HoldingCo’s creation was moving with all available speed, Mr Bowe told Tribune Business: “The expectation is this will be done in the shortest possible timeframe, working with the intention that things will be able to commence early in the New Year - investment in the ground, and getting the mobile company operational.

“There are a lot of milestones we want to achieve in the coming weeks before the Christmas holidays. I think we’re certainly on target with any type transaction of this magnitude.”

Mr Bowe explained that HoldingCo’s founding, from a legal and documentary perspective, was “a formality”. And market “soundings” to gauge “investor appetite” indicated there was enough demand for the company’s shares as an investment opportunity.

Further moves, however, had to wait until Cable Bahamas was selected as preferred bidder for the second mobile licence. Mr Bowe explained that it was only then that the Task Force and its advisers could engage with the BISX-listed communications provider to obtain the financial date required for HoldingCo’s private placement memorandum (PPM).

This is the document that will be issued to potential investors to induce them to buy shares in HoldingCo, and which has to contain all financial projections on the second mobile operator’s financial performance.

Mr Bowe said the Task Force’s sub-committee was working with Cable Bahamas to finalise data for inclusion in the PPM, such as NewCo’s projected capital expenditure, operating expenses, revenues, the likely internal rate of return, payback period and likely cash flows for defined periods.

While many of these details would have been contained in Cable Bahamas’ initial licence submission, Mr Bowe added that this dated back to February 2015 and needed updating since it was 10 months’ old.

While unable to give a date for the PPM’s launch, or the dollar figure for much HoldingCo will be seeking from investors, the PwC accountant told Tribune Business: “Hopefully, interest will materialise into actual investment.

“There’s no doubt that based on the soundings we have had, we feel we’re in a decent position. There should be liquidity and funds available for this type of process.”

He added: “What the Government [bond] issues have indicated is that there is significant liquidity in the market, with persons still looking for significant capital returns.”

Institutional investors in particular, Mr Bowe said, were seeking above average investment returns for the long-term, with higher interest returns than what is currently available on both bank deposits and Bahamas Government Stock (BGS).

He added that the ‘start-up’ nature of both HoldingCo and the mobile operator, in which Cable Bahamas will have a 49 per cent stake, meant the former was not an appropriate investment for retail investors.

With no performance ‘track record’ to draw upon, Mr Bowe said it was better suited to sophisticated institutional investors who had “the ability to analyse the risk and take advantage of the opportunity”.

He emphasised, though, that pension funds and credit unions, by their nature, would achieve the Government’s objectives of broad Bahamian ownership.

“It is going to be targeted at institutional investors representing a broad Bahamian beneficiary base,” Mr Bowe told Tribune Business.

“The Government wants it to be for the widest cross-section of Bahamians possible, and we have to look at groups that will be able to advance that.”

Both Cable Bahamas and the Task Force are also working to complete the shareholders’ agreement between the former and HoldingCo, and other formalities that will govern their future relationship.

While Cable Bahamas and HoldingCo will be responsible for start-up and initial capital costs in proportion to their shareholdings, the two sides will have to agree “projected capital injections” for each roll-out phase prior to the licences being issued.

The two sides will then finance these in proportion to their shareholdings, but the Bahamian investors in HoldingCo will have to agree to finance this via debt.

Cable Bahamas, the winning bidder, will hold a 49 per cent equity stake in NewCo operating company, and enjoy Board and management control.

HoldingCo is intended to be more than just a vehicle to hold a 51 per cent majority stake in a mobile operator. It will also be used to invest in public-private partnerships (PPPs), and other key infrastructure projects and assets.