The BTC bargain
Guardian News Editor
Published: Jun 24, 2013
Prime Minister Perry Christie has made the most profound revelation since the Bahamas Telecommunications Company take-back talks started: He is considering extending BTC’s monopoly to get back two percent of the shares held by Cable and Wireless Communications (CWC).
Christie has previously said the government cannot afford to purchase the two percent.
His recent statement on exclusivity has added an entirely new dimension to his administration’s controversial bid to change the BTC deal signed in 2011.
Under that agreement, CWC purchased 51 percent of the company for $210 million plus $7 million stamp tax on the transaction. As part of the deal, the Ingraham administration agreed to a three-year exclusivity period.
That ends March 2014.
We are now hearing from the nation’s leader that, that monopoly could be longer.
Of course, there were no details on how long the exclusivity period might be extended, and there is also no final decision on whether in fact it would be extended, according to Christie.
But the mere consideration of such an extension should raise the alarm for a public anxious for liberalization and the key benefits of competition: lower prices and improved service.
Over the course of months, we have heard multiple times from the prime minister that this matter will be concluded “soon”. But “soon” has never had a real timeframe.
A prime occasion to provide a well-considered update on this important issue was during his budget communication late last month.
There are several crucial questions we have sought answers to: What would extending exclusivity mean? Why would the government even contemplate such a thing? And what would be the practical effect of regaining majority control in any event?
If the government ever gets around to answering these questions, we hope that it would at the same time reveal the “horrendous” findings unmasked in examining the deal.
And what has happened to Christie’s pledge to conduct a public inquiry into the purchase?
It seems to have gone the way of some other pie-in-the-sky campaign promises that have been unrealized.
That pledge came on April 4, 2011 as the Ingraham administration was preparing to consummate the deal with CWC.
Christie, then leader of the opposition, issued one last ‘buyer beware’ warning to CWC.
“I further pledge that when we come to power it will be the policy of the PLP to have a full public inquiry into the sale of BTC’s assets to Cable and Wireless,” he said.
“There are too many unanswered questions about this deal. This is a bad deal. The deal stinks and the PLP remains committed to regaining this asset for the Bahamian people and to allow the Bahamian public to have a full and public view of the entirety of this transaction.”
Philip Brave Davis, deputy leader of the Progressive Liberal Party, had also promised a commission of inquiry to examine the sale.
At the time he made the commitment to reacquire controlling interest in BTC, Christie admitted that he did not yet know how it would be done, but he pledged to pursue “all legal means” to do so.
Amid great national tension over the deal, Christie declared in 2011 that, “The FNM administration under Hubert Ingraham has made a grave mistake voting to sell BTC to a foreign group.
“It is a mistake because we have at this juncture a once in a lifetime opportunity to transfer wealth to the Bahamian people on an unprecedented scale.
“The FNM through its policy of selling BTC at a fire sale price has missed that opportunity.
“This is a sad time for The Bahamas. If this subsists and persists, the future generations of Bahamians will not forgive us, nor understand how the FNM could have done this to our country.”
The pledge to take back control of BTC was among the issues that topped the list of promises ahead of the 2012 general election.
More than a year after returning to government, Christie has said he remains committed to fulfilling this promise.
Whether he will be able to do so remains to be seen.
CWC, from all indications, is playing hardball in its stance on BTC. After all, the deal was a legitimate one and BTC is among its strongest assets.
There is a huge difference between being a 51 percent shareholder and being a 49 percent shareholder.
As the negotiations are near air tight, it is impossible to know what CWC executives are thinking or planning at this juncture.
One option could be to try to get exclusivity extended for another three to five years, make as much money as it can and sell its interests, observed one person close to the process.
But that appears far-fetched. The Bahamian public would never swallow such a lengthy extension — if any at all — and Christie has said he is committed to liberalization “within this term”.
CWC, a public company, reportedly had made it clear to the Ingraham administration that its interest was in being a majority shareholder, not a minority shareholder.
Its balance sheet looks much better as a 51 percent shareholder. As the majority shareholder, it is entitled to treat BTC as its wholly-owned company. As a minority shareholder, BTC would appear on its balance sheet as an investment.
Christie has not folded up and put away this plan. He remains confident that he will deliver.
In time, he will have to deliver, or try to save face and move on if his administration’s policy on BTC proves to be misguided.
If the country has no money to buy back two percent and there is strong public rejection of any bid to extend exclusivity, then Christie’s options on this matter would be even more limited and his hope to reacquire control of BTC even more dim.
This idea of a possible extension of exclusivity has left a sense of uneasiness among some.
One observer opined: “This would be scandalous, almost immoral. This tells you how far these politicians would go to achieve their petty little objectives.”
Indeed, successive governments have long delayed liberalization at tremendous cost to the Bahamian public.
Extending it may prove to be a real violation of the interests of the Bahamian people — interests Christie has vowed to protect.
If Christie decides to put off liberalization, he would be denying consumers the real benefits of competition.
One local expert in telecoms who wished not to be named said, “Fifty-one percent ownership by a government before full liberalization will be seen as a warning sign to any other operator intending to enter this market.
“It will not be a viable business venture for any operator to come into a market to compete with the government who will have to also grant them their license.
“When the war of the carriers begins, and there will be wars, this new carrier will have to complain to their competitor. So, 51 percent ownership will mean no liberalization in wireless.”
Franklyn Wilson, the lead negotiator for the government in the talks with CWC, said the question is no longer if the government can get back the two percent. He said the question really is what will be the terms of this reacquisition.
“I’m not saying it’s the only thing, but Cable and Wireless has said that this is one of the things we see as important to us, so that’s a significant point,” Wilson told Guardian National Review.
“The significance or practical effect of it, that also depends on terms. It depends on the conditions under which you get it back.”
One thing that has not yet been adequately explained is the rationale behind the policy to regain a majority interest in BTC or the government’s plans once it becomes the majority shareholder.
Wilson was asked whether the Christie administration was pursuing this based on some philosophical or emotional view of BTC.
“The purpose behind keeping the telecommunications [company] is that it’s in my opinion the fabric of the country,” Wilson said.
“Look for example [at] today; look at what we are now finding out is happening in America, in terms of their national intelligence program.
“They have the capacity. We now know what the United States government does, even though things are privately owned and so forth. The United States government uses its influence with the telephone companies in certain ways to advance agendas that have nothing to do with telecommunications.
“The point is, in the electronic age, these things are complex and a lot of factors are involved.”
Repeating a point made by the prime minister, Wilson said the intent is not to harm the interest of the company or its shareholders.
“The key is this,” he said. “The government owns 49 percent of BTC. It’s still an important national asset.
“You do not wish to destabilize BTC to such extent that you are destroying shareholder value because you own 49 percent of that.
“On the other hand, you do wish to see liberalization because liberalization in theory will do multiple things, but in particular drive down prices and improve service, so these are factors that have to be balanced.”
Christie and the team he appointed to negotiate with CWC on the government’s behalf have seemingly expended a great deal of time and energy on this issue.
The negotiations appear to be a crucial point, and a lot could be on the line for both sides.
The prime minister has to now balance fulfilling a key election promise against the national interests.
Tinkering with the exclusivity deadline could prove to be a bad gamble.