The Tribune

By KHRISNA VIRGIL

Deputy Chief Reporter

kvirgil@tribunemedia.net

MORE than five years after a deal was inked by the previous Ingraham administration to sell the Bahamas Telecommunications Company Ltd (BTC), the government yesterday moved a resolution in Parliament to establish a select committee to probe the controversial sale to Cable and Wireless.

Suggesting the 2011 sale was essentially a “give away”, Minister of Labour Shane Gibson called the decision to privatise the telecommunications provider “damaging,” as he pointed to BTC’s revenue generation abilities.

The Golden Gates MP was also adamant that some inconsistency might exist between the cost at which the then Free National Movement (FNM) government sold BTC for and what its parent company CWC actually paid for it. BTC was sold to CWC for $210m, but Mr Gibson highlighted that in CWC’s audited financial statement, the company said it purchased the company at a cost of $204m.

Speaking in the House of Assembly yesterday, Agriculture Minister V Alfred Gray further accused key government personalities of pocketing millions of dollars in finder’s fees.

However, the Official Opposition yesterday maintained that this resolution was a deflection from several controversial matters that have come to light under the Christie administration, stressing that during the BTC sale there was absolute transparency. Opposition members also insisted that no government official under the last FNM government received any finder’s fees.

FNM MPs went on to draw comparisons between BTC’s sale to CWC and its proposed sale to Bluewater. This was a highly controversial proposal to sell BTC under the first Christie administration.

By forming a select committee, a five-person panel will have the authority to investigate, examine and inquire into the circumstances and facts relating to the privatisation of the company. This includes the sale of the majority shares to CWC with power “to send for persons and papers and to sit from place to place, with leave to sit during the recess.”

“After the Free National Movement (FNM) sold BTC, what did we get Mr Speaker? What did the Bahamian people get? That is what an appointed select committee would seek to find out,” Mr Gibson said as he moved the resolution yesterday.

“The former administration has said over and repeatedly that it received $210m for the sale of BTC. However, page 106 of CWC’s audit financial statements for 2012 suggests that they paid $204m for BTC.

“Cable and Wireless also suggested in its financial statements that it met $63m dollars worth of goodwill money in the bank on BTC’s account. Yet, then Prime Minister Hubert Ingraham said in Parliament on February 8, 2011 - the day he inked the deal to sell the 51 per cent stake - ‘that any sums in excess of $15 million left in BTC would be turned over to the Treasury.’ As a result of that money in the bank, CWC said its net payout for BTC was actually $148 million dollars.

Mr Gibson continued: “Additionally, Mr Speaker, Cable and Wireless said that 470 of the remaining 1,260 workers of BTC took the (separation) package at a cost of $60m. The FNM also agreed that after privatisation, BTC’s obligation to the BTC employee pension plan would be reduced from 20 per cent per employee to 10 per cent. The agreement provided that the balance of the obligation and associated risks would be assumed by the government, which undertook to guarantee any shortfall in the BTC pension plan through the establishment of a trust which was to be endowed with an initial amount of $39m.

“The trust was established but the $39m endowment was never made Mr Speaker. At the date of privatisation back in 2011, the BTC pension fund had a surplus. By the end of 2012, it was running a deficit of $35m dollars, which has since grown to $62m.

“What did the Bahamian people get? That is what the appointment of the select committee will seek to find out. The former administration has said over and repeatedly that it received $210m for the sale of BTC. However page 106 of the Cable and Wireless audit financial statements 2012 suggests that they paid $204m for BTC,” Mr Gibson also said.

The Progressive Liberal Party, then in opposition, was seriously opposed to the sale. It vowed to take back the 51 per cent majority share stake from CWC if it was elected to office.

When the party did defeat the FNM, a committee, tasked with this effort was formed.

Later, in 2013, lead negotiator in the take back negotiations Franklyn Wilson said due to “shocking revelations” that pointed to an “horrendously bad deal” it was recommended to Prime Minister Perry Christie that a select committee be appointed to probe BTC’s sale. He also suggested that the deal was to the benefit of the company and not the Bahamian people.

After a lengthy negotiation steeped in controversy, the prime minister in early 2014 announced that his government was successful in wrangling two per cent of the BTC shares from CWC’s hold. These shares were to be placed into the newly created BTC Foundation.

However, CWC retained board and management control of BTC and the foundation owned the two per cent equity stake that CWC relinquished.

This left both CWC and the government with matching 49 per cent equity stakes in BTC. It was perceived to be a “face saving deal.”

Deflection

During debate on the resolution, FNM Leader Dr Hubert Minnis rejected the assertion that BTC was undersold. He remained adamant that BTC became lucrative due to the vision of the FNM.

“The member (Mr Gibson) tries to paint a picture that BTC was undersold in spite of them investing well in excess of $300m, but it is very difficult to argue with individuals with business knowledge,” Dr Minnis said, as he stood on a point of order. “When you must take into consideration that a business is only worth what it is assessed at irrespective of the amount of money you pump into it. In other words if you took a home in Bain Town that’s worth $150,000 and I pump $10m it’s still $150,000.

“And the second point the member spoke about the profits that BTC made between 2001 and 2007. The member should clearly state that that was only as a result of the liberalisation process and the right-sizing that the FNM had commenced.”

Meanwhile, FNM Deputy Leader Peter Turnquest called the resolution a “deflection”.

He said rather than move a resolution over a deal that was transparent and already debated in Parliament, there were several other matters much more worthy of a select committee. He added that Bluewater was a “sweet deal.”

“The price agreed under Bluewater was $260m for 49 per cent of the shares of BTC. But there was a net balance of approximately $70m of BTC’s cash in its bank account in May 2007. I remember that is important because this side notes that when Cable & Wireless took over (there) was cash in the account that was not claimed by the government and as a result it gives to the amount that Cable & Wireless actually paid to BTC. But in this deal $70m was in the account. There was no allowance in Bluewater’s offer for this cash to be removed from BTC. So in other words they were contemplating a deal that said the $260m was the price and whatever was in the account you keep it and so they were already ahead $70m.

“Using the same math we have heard with respect to CWC transaction, this constitutes a net cash transaction of $190m. Of this $25m was deferred for five years and another $15m differed for six year so here we are down to $190m and we are going to take another $40m and deflect it into the future. Just on the value of money they are ahead, they are making money now. But here is the sweetness of the deal. Under the CWC deal the extension of the monopoly was proposed for three years, under the Bluewater deal, was for six years.”

He went on to question the specifics of the BTC Foundation. He said the FNM had major concerns with its formation as no documents had been tabled in the House on the matter, despite promises that the government would do so.

For her part, Long Island MP Loretta Butler-Turner said based on the information that was brought before Cabinet under the last FNM administration, she knew of no malfeasance committed by the Ingraham administration.

However, she also admitted that one of the reasons the FNM government lost the 2012 election was due to the sale of BTC.