Published On:Thursday, March 11, 2010

Sub-Deck:

* Minister says government 'will know where we stand one way or another' by end-June, when fiscal year ends

* Acknowledges 2009 year-end target to identify buyer was missed

* But adds that bid quality not 'playing heavily' in government evaluations

By NEIL HARTNELL

Tribune Business Editor

The Government will "know where we stand one way or another" on the Bahamas Telecommunications Company's (BTC) privatisation by end-June 2010, a minister acknowledging yesterday that the process was "three months behind schedule" and that the 2009 year-end deadline to identify a buyer had been missed.

Zhivargo Laing, minister of state for finance, told Tribune Business that despite that missed deadline "the process continues", denying that the Government and the various committees it appointed to advise it on the BTC privatisation had been disappointed by the quality of bids and prices offered.

And Mr Laing rebutted criticism from the opposition Progressive Liberal Party (PLP) about the Government's failure to privatise BTC to date and the nature of the process, arguing that the Ingraham administration was being far more "transparent" than the former Christie government had been in its attempts to sell a stake in the state-owned incumbent to Bluewater Communications Holdings.

"We had a schedule upon which we were working," Mr Laing told Tribune Business. "We are three months behind schedule, but the process continues.

"We had hoped to be able to identify a buyer by the end of last year. That was not achieved, but in one way or another, we will know where we stand in this process that we're engaged in by the end of this fiscal year."

The Government's fiscal year ends on June 30, meaning that BTC's fate - and whether the current attempt to privatise the 100 per cent state-owned company - may well become clearer by then.

Selling what was initially supposed to be a 51 per cent stake in BTC was seen as vital to controlling the 2009-2010 Budget year's fiscal deficit, now expected to be more than 3.9 per cent of GDP, with the sale proceeds also used to help pay down the $3.9 billion national debt.

Mr Laing, who chairs the advisory committee, the body that overseas the work of the Government-appointed BTC privatisation committee, emphasised that the effort remained "active", that "evaluations continue and the process is not finished until it is finished".

When asked whether the delays were due to the fact that the Government and its committees were unimpressed with the quality of bids offered, Mr Laing replied: "I can't comment on that. That's not an issue that was playing heavily on any considerations that I am aware of."

Three successive Bahamian governments have been attempting for more than a decade to privatise BTC. The first Ingraham administration was thwarted by the fact it ran out of time, combined with the inability to have an unqualified audit sign-off on BTC's then-financial statements.

The process was inherited, somewhat reluctantly, by the Christie government, which in 2003 abandoned the then-effort after rejecting a $130 million offer from the BahamaTel consortium, a group put together by Bahamian banker Tom Bain, and featuring the JP Morgan and Citigroup private equity arms. Rival bids from BlueTel and Trans-World Telecom (Bahamas) were also rejected.

The Christie government restarted the process, but rather than hold an open-door 'beauty contest' it opted for a method that Mr Laing argued lacked transparency.

The ultimate result was that, just prior to the 2007 general election, the then-PLP administration signed an agreement to sell a 49 per cent stake in BTC to Bluewater for some $260 million. The purchase price was to be paid by a $220 million instalment up front, $35 million after five years, and a final $5 million in year six.

Upon taking office, the Ingraham government disputed whether any binding agreement with Bluewater existed, and argued that its predecessor had been attempting to sell BTC 'on credit'. The Bluewater bid was ultimately rejected amid acrimony, and the company and the Government are now embroiled in London-based arbitration proceedings understood to be heating up.

The privatisation process was restarted again last year, but the last public announcement on its progress was an October 14, 2009, statement that the due diligence phase had commenced. That was some five months ago.

As previously reported by Tribune Business, it is understood that in the initial stages the Government and its privatisation committee was favouring the bid by the J P Morgan/Vodafone combination.

UK media reports confirmed last November that Vodafone was considering whether to participate in a consortium being put together by JP Morgan Partners, in which it would effectively be the operating partner for a privatised BTC and provide the management/technical expertise should the group ultimately succeed in clinching a deal with the Bahamas government.

In return in was suggested Vodafone would receive an equity stake in BTC.

Apart from Digicel, the pan-Caribbean based wireless/cellular operator which has long been desperate to enter the Bahamian market to round-off its presence in this industry, the other remaining bidders were said to be Atlantic Tele-Network and Trilogy International Partners.

Atlantic Tele-Network, which is listed on the US Nasdaq stock market, provides wireless, fixed-line and broadband Internet in markets in the US and the Caribbean, making it - on the surface - a good fit for BTC given that it is in the same products and markets.

The company has a presence in Bermuda and the Turks & Caicos, where it operates as Bermuda Digital Communications; in Guyana, where it is GT & T; and Choice Communications in the US Virgin Islands. Atlantic Tele-Network said it specialises in telecoms markets that are underserved and provide geographical challenges, again making it a seemingly attractive partner for BTC.

Trilogy International Partners also has a presence in the Caribbean, where it is present as ComCel Haiti and TrilogyDominica in the Dominican Republic. It also has operations in Bolivia and New Zealand.

Headquartered in the US, Trilogy has a regional operations office in Fort Lauderdale, and chiefly targets wireless/cellular operations for acquisition in markets it believes have major growth potential.

Given Digicel's presence also, it appears that the BTC privatisation process has attracted a number of predominantly cellular operators. That should come as no surprise, given that 70 per cent, or more than two-thirds, of BTC's revenues come from its cellular monopoly, effectively meaning that the company is a glorified cellular operator with a declining fixed-line business - due to competition - and an Internet business that clearly lags that of Cable Bahamas.