Trust gets 2% of BTC in 'face saving deal'

As of Wednesday, January 22, 2014

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Telecommunications Company’s (BTC) controlling shareholder will enable Perry Christie to claim he has regained majority ownership for the Bahamian people by handing 2 per cent of its equity stake to a foundation, in a deal where “everyone saves face”.

This is the main feature of the agreement that has been worked out by London-based Cable & Wireless Communications (CWC) and the Christie administration’s negotiating team, with nothing changing at BTC in terms of its daily operations.

The key terms, as revealed by well-placed sources to Tribune Business yesterday, are:

CWC will retain Board and management control at BTC.
An entity, called The BTC Foundation, will be created to own the 2 per cent equity stake that CWC is relinquishing in the privatised carrier.
This will leave both CWC and the Government with matching 49 per cent equity stakes in BTC.
Perhaps most importantly, there is no indication that the agreement with CWC involves an extension to BTC’s three-year post-privatisation cellular monopoly, which is due to expire on April 6, 2014.

There had been fears CWC would seek an extension to this in return for relinquishing majority control, something that would have denied Bahamian consumers the benefits of reduced prices, improved services and greater choice stemming from competition.

These details were effectively confirmed by panicky phone calls to Tribune Business from BTC and government-related sources, who - informed of this newspaper’s likely article - asked whether it had a copy of the Memorandum of Understanding (MoU) agreed between CWC and the Government. Offers were also made to this newspaper to ‘drop the story’, in return for ‘exclusive interviews’ with unnamed persons.

Tribune Business understands that top CWC executives, including chief executive Phil Bentley, are due to fly-in to Nassau tomorrow for a formal agreement signing at a 5pm press conference with Mr Christie and his government.

Yesterday’s Cabinet meeting was intended to ‘rubber stamp’ the agreement with CWC, with Tribune Business understanding that The BTC Foundation, a trust-type structure, will make donations to a variety of Bahamian social and community projects.

And it will also, according to highly-placed government sources, donate monies to the Bahamian telecommunications and technology industries.

It is unclear where The BTC Foundation’s income will come from, but Tribune Business understands that it may receive some of the dividend income due to its 2 per cent stake from the carrier’s profits. Based on BTC’s recent performance, this would likely amount to a six-figure sum annually.

This, though, would conflict with suggestions that the Government was set to receive the extra 2 per cent dividend income, giving it 51 per cent of all capital returned by BTC to its shareholders.

It is unknown whether the Foundation would gain a BTC Board seat in return for its shareholding, but it is likely to be run by government-appointed, independent Bahamian trustees.

This will allow the Prime Minister to assert that he has fulfilled a 2012 election campaign promise to return majority control of BTC to the Bahamian people, adding the Foundation’s stake to the Government’s existing 49 per cent.

Yet the agreement, as detailed to Tribune Business, will allow all sides to argue that they got they wanted.

CWC, for its part, has likely achieved its two key objectives in the negotiations - retaining Board and management control, and ensuring it can still consolidate BTC’s accounts and record its financial results as part of the wider group’s.

And while the Government and its supporters will likely argue that the Prime Minister and his negotiating team have succeeded against all odds, and forced a global telecommunications giant to back down, the Opposition FNM and other Bahamians will likely have a much different view.

They are likely to argue that the Prime Minister, and his government, have concocted a ‘smoke and mirrors’ deal that has not really returned majority ownership to the Government.

And, with CWC still in charge, they will likely question what has been achieved, arguing it has been a huge waste of time, money and effort, and a major 20-month distraction, at a time when the Government should have been focusing on issues such as crime, fiscal reform, the economy and energy reform.

“It’s certainly face saving for the Government,” one source said of the agreement. “Prima facie, everyone saves face,” another added.

Another well-placed source suggested that CWC had to agree to a compromise, as the Government - having so publicly committed itself to regaining majority control - could not have come away empty-handed without embarrassing Mr Christie.

“When Government engages itself so clearly, they had to find a face-saving mechanism,” the source said. “They couldn’t have come away with nothing. That would have been completely untenable for the Prime Minister and his party.”

It is unclear whether the Government has made any payment to CWC in return for it relinquishing the 2 per cent stake.

However, the deal it signed with the then-Ingraham administration in 2011 requires the Government to pay a $40 million penalty if it arbitrarily changes any terms of the agreement in the third year post-privatisation - a time period we are now in.

And, with the 2 per cent likely to incur a premium, as it represents the controlling interest, the Government would likely have had to pay between $50-$60 million to CWC.

The cash-strapped Treasury would have been unable to afford this, and as no provision was made for such a payment in the 2013-2014 Budget, it could have pushed the fiscal deficit back over $500 million.

Tribune Business sources, though, suggested that the Government had initially looked once again to the National Insurance Board (NIB) as a ‘cash cow’ to finance its BTC dream, but this route was subsequently rejected.

Other plans talked of ‘non-voting rights’ for the BTC shares represented by the 2 per cent stake, and the Government also ultimately selling the stake and giving the proceeds to CWC.

“It is absolutely ludicrous,” one source said of the BTC negotiations. “We’ll see how it’s spun, how they convince the public it makes sense. I just think it’s a huge, huge waste of time and effort, and goodwill.”

Still, the source express relief that the Bahamian cellular market liberalisation timetable appeared not to have been impacted, as there had been suggestions CWC wanted a two-year extension.

And they added that the foundation proposal, and CWC’s continuing ability to consolidate BTC’s results in its accounts, were likely to have been signed off by London-based auditors.

CWC last night said in a statement: “Cable & Wireless Communications notes today’s press speculation in the Bahamas, and confirms it has come to an agreement with the Government of the Bahamas, the details of which will be disclosed at a press conference at 5pm Bahamian time tomorrow, to be attended by the Prime Minister and the chief executive of Cable & Wireless Communications.”

MarkTa 10 years, 3 months ago

So 60 million to make it seem like they got the 2% back? And even then the real deal will be posted on front pages of newspaper negating that and making the PLP look more silly, meaning the 60 million was for nothing?

lol...

IsRightWrong 10 years, 3 months ago

Why is this being labeled as "face saving?" The government did not regain control of BTC. The PLP campaigned on regaining control of BTC. Which idiot sees this as a victory for the government? If you are one of those idiots, I have a diamond mine located off Blue Hill Rd to sell you. You can contact me at (242) DAM-IDIOT.

nationbuilder 10 years, 3 months ago

ha! 'tis quite true, the government hasn't saved a thing, face included

IsRightWrong 10 years, 3 months ago

Easy for the PLP to use their propaganda on clowns. That's why they got elected

proudloudandfnm 10 years, 3 months ago

Question: "Did ya get the 2% back? Answer: yep. Question: Does the Bahamas own BTC again? Answer: um... no...

nationbuilder 10 years, 3 months ago

actually the answer to the first question is no too, not yep

TalRussell 10 years, 3 months ago

Where-in lies the truth since the day Hubert sold BTC? Save face is what Comrade leader Minnis and Loretta are scrambling to paint. Effective immediately CWC must delete any reference to owing a majority controlling shareholder interest in The (Returned to da People) Bahamas Telecommunications Corporation. The controlling shareholder ownership now reverts back to Bahamaland's government. What Bahamalanders have never been able to do is to connect all the secret dots which lead to a foreigner ownership of BTC. Considering the obstacles intentionally crafted by the red shirts, PM Christie succeeded far beyond what Hubert ever thought would be possible for any PM to climb-over, much less PM Christie. Dammit, Hubert he not only ran you from office but outsmarted you on the fine print.. Let us not forget the deep division within the ranks of Hubert's cabinet and House MP's against this sale, causing Hubert to stand-up in the House and bully his cabinet colleagues and MP's into either voting to sell BTC, or he would call a snap General Election, risking their House seats. Comrades this is no lie.

nationbuilder 10 years, 3 months ago

LOL!! Laughing at the majority ownership part. the other fnm/plp stuff i couldnt care less about

banker 10 years, 3 months ago

Rot, bosh, and bull!

IsRightWrong 10 years, 3 months ago

The trust is a separate entity, therefore the government does not have controlling share holder interest. I still don't understand why you see it as a victory for the government. CWC still controls the day to day operations of the company.

GrassRoot 10 years, 3 months ago

Who is the Ultimate Beneficial Owner of the Trust? Sounds like a pre-retirement deal for some people.

TalRussell 10 years, 3 months ago

Comrades yes, yes, yes you better believe how import it is who owns/controls 51% of stock ownership. I'll bet you CWC knows the importance. .

JohnDoe 10 years, 3 months ago

The devil is in the detail but on the face of it this appears to be akin to a sleight of hand magician's trick with absolutely zero substantive value or effect. CWC continues to be able to consolidate BTC's operations into its accounts which tells me that what's happening here is that by introducing an intermediary, CWC has converted its legal interest in the 2% to an equitable interest in the assets of the Trust . Substantively ownership does not change though the Trust may disguise the character and nature of that ownership. All smoke and mirrors with no substance.

birdiestrachan 10 years, 3 months ago

Pm Ingraham left a 40 million penalty in place. The Bahamas Government did not have to pay. They paid not one single red cent for the 2% . interest in BTC. And all of the naysayers were proven wrong. Who would not want a deal like that. ? You can call it a face saving deal if you wish. You have to say something negative. you write for the Tribune . It is your job to do so , and you do it very well.

Dr. Minnis and Mr. Darron Cash are in SHOCK. They have not said anything. and the TV station that appears to live at DR. Minnis house would have had some response from him by now.

IsRightWrong 10 years, 3 months ago

The government does not own 2%. Obviously folks don't fully understand the concept of a trust.

proudloudandfnm 10 years, 3 months ago

CWC still owns BTC. 2% shares were stripped of voting power, controlling interests were not transferred today. All we got was another crony job creating foundation...

banker 10 years, 3 months ago

Here is some news for those who do not understand the inner workings of stock holdings. Stocks can come with a proxy. If one is a voting shareholder, and these stocks are equity stocks with voting rights, one can attach proxies to these stocks. The proxy enables the holder of the proxy to vote the shares. Shares without votes are meaningless.

So CWC retains the proxies for the 2% and that means they still retain effective control of the company. They can even vote to assign the dividends to anyone or reduce the amount of dividends.

So CWC still is the virtual owner of the company. This is all just smoke and mirrors.

UBUNTU 10 years, 3 months ago

ubuntu: "I am because we are". "Absolute power opens an avenue for plunder, creating opportunity for exploitation and allowing the few to make money without serving the many. Since there aren't any free lunches in life, somebody is paying for this. Indeed, when a person, through force and coercion, exploits a metaphorical free lunch, he has stolen from another individual his time, effort, and reward. Just because someone has the power to exploit doesn't make it right. As Horace Greenley explained, "The darkest hour in any man's life is when he sits down to plan how to get money without earning it.""Woodward

Still, there are no shares available for the average Bahamian

Still, CWC owns the ARCO fibre-optics infrastructure

CWC still controls the BTC Board

CWC will have to give us a share of its relative profits over time (subject to future competition?)

Good try Perry!!!!!!!!!!!!!!!! This is not a win for you sir!!!!!!!!!!!

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