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'Flawed' Btc Process Means No Fdi Impact

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Foreign investors are unlikely to be deterred by the Government’s efforts to renegotiate the Bahamas Telecommunications Company’s (BTC) privatisation because the sales process was “flawed”, a former finance minister told Tribune Business yesterday.

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James Smith

James Smith, a former Central Bank governor who is now a key Ministry of Finance consultant, said the sale of a 51 per cent majority equity interest in BTC to Cable & Wireless Communications (CWC) did not fit the “standard privatisation model”, and suggested knowledgeable investors would recognise this.

Describing the BTC deal as “a special case”, Mr Smith effectively said the sales process was undermined because CWC was not among the initial entities who responded to the Government’s request for bids.

Those who did entered a so-called ‘beauty contest’, where their offers for BTC were compared and matched to the Government’s own expectations, but CWC did not participate in this - only entering the process at a later date.

Asked whether the Christie administration’s decision to renegotiate the privatisation terms with CWC could negatively impact investor perceptions of the Bahamas, Mr Smith replied: “It’s difficult to say, but you must recall that BTC was not your regular kind of privatisation in the sense that when the exercise was conducted initially a number of carriers were involved.

“They submitted their bids, and CWC were not at the table reportedly. While those other guys were waiting for the results of their bids, discussions were taking place with CWC who were not at the table. It seems to have been negotiated privately.”

Mr Smith told Tribune Business that this meant the BTC situation was totally different to Argentina, which recently come under fire for its decision to re-nationalise an oil company majority owned by Spain’s Repsol.

“The process involving this one [BTC} would appear on the surface to have been flawed,” the former finance minister said.

“If it was generally known that is what is being corrected, that would take on a different meaning to people examining the Bahamas.”

Suggestions that CWC entered the BTC sales process by the ‘back or side door’, and that the Ingraham administration and its privatisation committee were conducting two separate, parallel negotiating processes have been made before.

David Shaw, chief executive of CWC’s Caribbean regional arm, LIME, told Tribune Business in early 2011 that the company was not among those who entered the ‘beauty contest’ bidding because it was, at the time the process was launched, focused on restructuring its existing businesses.

Once this was completed, CWC/LIME then approached the then-Government to see if there was any possibility it could become involved in the privatisation process.

Julian Francis, head of the privatisation committee, in a previous interview with this newspaper effectively refuted Mr Smith’s concerns.

He said the committee, and the Government, only started talking to CWC after they failed to reach a deal with the two leading bidders, One Equity Partners/Vodafone and the Atlantic Tele-Network/CFAL combination.

Still, Mr Smith suggested that foreign investors would be able to ‘read between the lines’ in assessing the Christie administration’s BTC position, and would not be discouraged from looking at the Bahamas as a safe place to invest their capital.

He added that the terms reached with CWC also breached the consensus reached on BTC’s privatisation by the two major political parties a decade before, with the deal almost being an “in your face” response to its opponents.

“When the process started a decade ago, both political parties agreed that privatisation was the way forward, and that the Government would retain 51 per cent. That changed at the last minute,” Mr Smith told Tribune Business.

“The history and circumstances surrounding this one [BTC} make it a special case.”

He added that he “doubted” whether the Christie administration’s stance would impact foreign direct investment levels, and said investors were “likely to see it does not fit the standard privatisation model.

“Normally, consideration should have been given to some kind of objective review by a credible outside agency, which would do an audit and see if it met the standard for privatisation,” Mr Smith added.

Given the opposition and demonstrations that took place over the CWC deal, Mr Smith said the process “should have been handled differently” with all stakeholders brought into the fold. When this did not happen, the BTC privatisation became “an almost in your face kind of thing”.

He tacitly acknowledged, though, that the Government’s election campaign pledges and subsequent public statements meant it had little choice but to try and achieve something in talks with CWC over BTC.

“The thing about governments is that once hey put things in train during the political process, they tend to be held to it. That determines their priorities more than anything else,” Mr Smith added.

James Smith

Comments

Puzzled 7 years, 9 months ago

If Mr Smith is as smart as his article is long he will know that the original and the subsequent bidders all pulled out because they were not prepared to do business as a minority partner to any government body. Prior to CWC the one company remaining was an unknown entity and if only some of the rumours about the bidder are true then they would not have been a minority partner with the government. I still think that many possible investors are going to think twice about investing here especially a joint venture with any government entity. They are not going to bother whether it was not "a standard privatisation model" they are just going to see a deal that was voted on and approved by the Bahamian government and then they are going to see the same Government of the Bahama trying to renege on the deal after the purchaser has invested millions in new systems. Systems that are scarcely likely to work properly the way the government is kicking out the ex pats that were brought brought in to set them up. The anti ex-pat fervor that is being fomented by the members of the current administration may also influence future foreign investors. By the way I do understand that not everyone who comes here on a contract intends to stay and take a job away from a Bahamian. Some of them are only too happy when the contracts are over and they can return to normalcy.

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Puzzled 7 years, 9 months ago

I should add on a point of historical accuracy, Cable and wireless may have been the original suitor for BTC as they had talks with the Christie government in the 90's before the original auction process had been mooted.

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Observer 7 years, 9 months ago

Please give us, the public, the whole story of the BTC fiasco on one page, instead of little bits and pieces from persons on opposite sides of 'the fence'. The public is sufficiently intelligent to do an accurate assessment of the deal. Or, is there something to be hidden from public scrutiny?

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concernedcitizen 7 years, 9 months ago

can u say plp mouthpiece,...mr smith you know better than that ,you can spin it any way you want ,but when a country sells something to a foriegn firm ,then tries to take it back through union coercian ,that scares the hell out of pontential investers ...

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Stameko 7 years, 9 months ago

@Observer I found it on a page (people should definitely read more and not speculate, you are right) - see

http://www.thebahamasweekly.com/publi...">http://www.thebahamasweekly.com/publi...

Also see:

http://www.bahamaslocal.com/files/Off...">http://www.bahamaslocal.com/files/Off... - I believe ATN, One Equity and CWC all bid on 51% also

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