The Government of The Commonwealth of The Bahamas today announced that it had signed a Memorandum of Understanding (“MOU”) with Cable & Wireless Communications Plc, U.K. (“CWC”), in connection with the sale of a 51% interest in the Bahamas Telecommunications Company Limited. This MOU represents the outcome of extensive discussions between CWC and the Government over the last several months.
CWC is a global, full-service communications company which operates leading communications businesses through four regional units – the Caribbean, Panama, Macau and Monaco & Islands. Its services include mobile, broadband and domestic and international fixed line services in most of its markets as well as pay-TV, data centre and hosting, carrier and managed service solutions. CWC is a FTSE 250 communications company with $2.5 billion revenues, operating in 37 countries in Landline, Mobile, Broadband and Entertainment (13 of which are in the Caribbean).It has 8.3 million mobile, 1.8 million fixed line and 600,000 broadband customers.CWC has been in the telecoms business for 140 years, and is a trade buyer with a long term strategy and interest. CWC is expected to bring synergies to BTC in terms of procurement savings, administration savings, IT implementation and support, network operations support and others.
CWC and the Government will work together to finalize contractual terms and obtain necessary consents and other regulatory clearances in order to complete the transaction in the first quarter of 2011.
Under the MOU, it is proposed that:
· CWC will acquire a 51% majority equity stake in BTC, including management control of the business, for US$210 million plus stamp taxes.
· The Government will also receive any excess net cash in BTC over and above US$15 million (calculated at completion), subject to a normal level of working capital being maintained in the company.
· CWC will work with the Government and the management of BTC to finalize a business plan for BTC, addressing its plans for the modernization of telecommunications throughout The Bahamas, for the development of BTC following privatization, and how service rates charged to Bahamian consumers could be reduced in the period leading up to the liberalization of cellular services.
· It is also the intention under the MOU that BTC will become a significant part of CWC’s Caribbean business and strategy, that there continues to be substantial Bahamian participation in the management of the company, and that CWC affords Bahamians meaningful opportunities to work within CWC’s regional operations. It is expected that being part of a telecoms group such as CWC will create a variety of opportunities for Bahamians to succeed in a global organization.
· BTC will enter into agreements with CWC providing, on an ongoing basis, for various support services, branding, and use of intellectual property.
· There will be a restructuring of the workforce of BTC following completion of the transaction, which will be carried out on an entirely voluntary basis. It is intended that the voluntary workforce restructuring will be concluded by the first anniversary of completion. A detailed plan is in the process of being developed.
· Measures have been taken to ensure that the pension entitlements of existing employees and retirees of BTC are not affected by the transaction.
· The Government may sell up to 9% of the shares of BTC out of its remaining 49% shareholding to the Bahamian public at any time following completion of the transaction. After 3 years the Government may sell up to 25% inclusive of shares sold in the first three years.
The Government plans to amend the timeline for liberalization of the mobile sector, so that the liberalization will commence no sooner than three years after privatization.
As a result of the privatization of BTC and liberalization of the cellular market, it is expected that consumers will benefit from more affordable access to higher quality services across all regions of The Bahamas. As a result of improved communications services, The Bahamas is also likely to become more competitive as a business and tourism destination.
A privatized BTC can be expected to continue a policy of outsourcing non-core functions, thereby supporting the large and growing small business community which depends heavily on BTC today. It is expected that there will be a significant degree of new entrepreneurial opportunity available to Bahamians as a result of the privatization of BTC, and liberalization of the market.
Also, Cable and Wireless has an established record throughout the region, of strong support for sports and community development, consistent with the emphasis which these causes have enjoyed through BTC.