Assessment of Government Ministers’ Position on Proposed Sale to Cable & Wireless

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Lynden Nairn

By Lynden Nairn

Recently a popular Bahamian television station hosted a round table discussion on the proposed privatization of BTC featuring Ministers Turnquest, Laing and Maynard and the Honourable Carl Bethel. They are referred to hereafter as the ministers.

The ministers’ statements and positions were such that I thought it would be helpful for people to read and consider what they said and to make up in their own minds whether the ministers should be allowed to make a decision with respect to the sale of BTC, and the future of telecommunications in The Bahamas. Listed below are selected statements by the ministers and my commentary on each. Read and decide.

1. Ministers – “We have asked that we don’t want any forced separation packages and so any price that we got is cognizant upon that.”

By this statement, the ministers suggest that the price of 51% of BTC is driven lower by the fact that the government insisted that there not be any forced separation packages for BTC’s employees. However, the government said previously that the exclusivity period was extended to compensate for the cost associated with not forcing a reduction in staff. Assuming that to be the case, it is untrue to say that the price for 51% of BTC is influenced by no forced reduction in staff. Instead, the cost of retaining the extra staff is compensated for by extending the exclusivity period.

2. Ministers – “A new comer would come into the market…(and could provide Bahamians) with more minutes for less money, where they (Bahamians) get better products with less problems.”

The point the ministers make is that Bahamians, as the ministers said previously on a local radio station, have the financial and intellectual wherewithal to successfully compete against BTC while offering the Bahamian public lower rates and more services. However, rather than allowing those Bahamians to enter the marketplace now, the government would prefer to bring in a foreign company to strengthen BTC so that BTC can successfully compete against those companies that Bahamians will be allowed to form in the future. The government claims that this approach ensures BTC survives and that persons remain employed. Could not the government pursue a deliberate course of privatization and liberalization by mandating a reengineering of BTC, creating an infrastructural arm of BTC, downsizing BTC? Could not all those things be pursued after giving the public notice of a date certain for privatization and liberalization?

The reality is that when they correctly state that Bahamians have the capability to successfully compete against BTC, the ministers effectively argue against 90% of their contributions during the program.

3. Ministers – “They (two companies that submitted bids) put in a bid that reflected a value of BTC that is far different than what we think BTC is worth… and so we just did not think that their offer made good sense for the Bahamian public. So we ultimately rejected all those bids”

The ministers never said what those bids were. The ministers are challenged to provide the Bahamian people with the details of the competing bids as well as the details of the government’s own valuation. When the competing bids are submitted for scrutiny, it would be useful to observe how the government weighed the effect of assuming BTC’s pension liability. Furthermore, notwithstanding what the ministers said at this juncture, we note that the ministers contradicted themselves later during the program when the ministers said that all of the bids along with the independent valuation and the government’s assessment were in the same ballpark. What are we to believe? Both statements cannot be true.

4. Ministers – The control of any company vests with the board of directors, not the shareholders in terms of day to day operations. The shareholders meet once per year.

Surely the ministers know that it is the shareholders who appoint the directors and hence it is the shareholders who ultimately control the company. This is not just legally true but in an environment where there is a single majority shareholder, this reality is easily evident.

5. Ministers – “No group of Bahamians has entrenched experience in telecommunications.”

As previously stated, the ministers said that Bahamians have the capacity to provide the services we need, but the government does not want them to compete against BTC at this time.

6. Ministers – “That means whatever thousand two thousand you have to get to make decisions you need to hear from two thousand owners.”

The ministers seem not to understand that when companies make decisions they need not hear from all of the shareholders individually.

7. Ministers – “I own a company Jones Communication, I work for Jones Communication, I am the CEO. I get a CEO’s salary, but I also own the company. So if the company makes a profit, I also get dividends. That isn’t unusual.”

The ministers equate the payment of a management fee of 2% of BTC’s revenues to paying a salary to a CEO who is also a shareholder of the Company he works for. Nothing else need be said here.

8. Ministers – “The Bank of The Bahamas’ shares is not listed on BISX.”

Indeed, Bank of The Bahamas shares have been listed on BISX since November 25, 2004.

9. Ministers – “We did a valuation. The bidding companies did a valuation. We had an independent valuation done of the company and all of those values came in within the same range.”

This statement contradicts the ministers’ earlier statement. However, it would be interesting to find out from the ministers what the range is. It is doubtful that the ministers compared the offers adequately. For instance, if one offer was for $200 million and did not require the government to assume the current pension liability, was that offer regarded as more or less than Cable & Wireless’ offer of $210 million, but required the government to pay the pension liability of $40 million?

10. Ministers – “In our memorandum of understanding they are saying that we are leaving $15 million on the day of sale and that’s working capital.”

The ministers said that BTC will be left with $15 million. The MOU does not say that. What the MOU says is that BTC will be left with $15 million “net cash”. That word “net” should not be glossed over. The MOU defines “net cash” to be the difference between actual cash and long-term debt among other things. The requirement that net cash must be not less than $15 million means, in fact, that BTC will be left with cash of around $60 million. The ministers ought to know that.

11. Ministers – “With the greatest respect, he (Cable & Wireless) is paying $210 million to you for the equity that you are giving up in the company. He (Cable & Wireless) is putting that in.”

This is one of the sadder aspects of the ministers’ presentation. It is not true that Cable & Wireless is paying $210 million for 51% equity in BTC. The $210 million is paying for the 51% equity in BTC, the $40 million pension liability, the ongoing pension shortfall and the management fee. There is not a single financial analyst or accountant anywhere in the world who would say differently.

12. Ministers – “No you have $217 million then what you say is I have an obligation, I have always had an obligation to the employees of BTC.”

This was one of several attempts the ministers made to explain why they believe the government’s assumption of BTC’s $40 million pension liability should not be netted against the $210 million from Cable & Wireless in order to arrive at the net consideration received. The ministers are clearly mistaken.

13. Ministers – “We have ensured that much of BTC’s  real estate assets remain with the government of The Bahamas. We went through an exercise – there are now currently about 49 parcels of land, I think, that we have retained within BTC and everything else was pulled back out and vested with the treasurer of The Bahamas. In terms of the real estate, it’s only the real estate that is necessary towards telecommunications (that remain with BTC).”

All the buildings occupied by administrative and technical employees remain as assets of BTC. This presents 2 issues. First, both the government and Cable & Wireless have already forecasted that up to 33% of BTC’s staff will be disengaged. That means in all likelihood up to 33% of BTC’s office space will no longer be needed by BTC and will therefore be sold. When sold Cable & Wireless will enjoy 51% of the proceeds. Secondly, the government ought to have considered what impact selling all of BTC’s offices and thereafter having BTC rent space would have on the valuation of BTC. If this analysis were done, it would be obvious that that the benefit derived from the proceeds derived from the sale of those buildings and the interest saved as a result of paying down government debt would far outweigh the reduction in BTC’s valuation. Indeed, the net positive impact on the public treasury would be well over $100 million.

14. Ministers – “This is not new to The Bahamas. We have had experience of government corporations hiring foreign managers. We tried it and it failed.”

This was the ministers’ response when asked whether they considered engaging Cable & Wireless to manage BTC. To appreciate whether the ministers are being rational, one needs to consider that response while having regarding for what the government has done at NAD and what is in progress at BEC.

It would be wrong to suggest that everything that has been done in pursuit of BTC’s privatization was wrong. The ministers were correct on two important fronts. First, the ministers were correct that many of the decisions taken by the first FNM government years ago continue to have a net positive impact on BTC. Second, the ministers were correct that the PLP’s deal was a bad deal as well.

If having read the foregoing, one believes that the ministers have the competency to make a decision with respect to what should happen to BTC, one should line up in support of the proposed deal with Cable & Wireless. Otherwise Bahamians should ask for a more thorough and scientific assessment that has at its core objectives, the interest of Bahamians. You decide.

17 COMMENTS

  1. Fairly good writeup but one flaw in a few points were a recurring theme. (if what said here is true about the minister’s comments).

    We see it in Point 9 and 13 are as they are making wayyyy to many assumptions.

    Point 9. “It is doubtful that the ministers compared the offers adequately. For instance, if one offer was for $200 million and did not require the government to assume the current pension liability, was that offer regarded as more or less than Cable & Wireless’ offer of $210 million, but required the government to pay the pension liability of $40 million?”
    …and how do you know they didnt compare the offers and take into that when valuating? This is purely speculation and assumption. Respected financial firms specializing in M&As and financial matters worked on the deal and surely arent dummies when it comes to various asset pricing models) and asset valuations.

    Point 13 – “That means in all likelihood up to 33% of BTC’s office space will no longer be needed by BTC and will therefore be sold. ”

    Another major assumption! How you just assume they will sell the space! They can use the space and perhaps build data rooms, NOCs, training facilities, meeting rooms, fitneess facilities or other things companies do when presented with more office space. But none of these were presented.

    They may sell it or rent it but we dont know that.

  2. As an investor in Cable Bahamas i expect this company to FIGHT against this 3 year monopoly period for C&W.I want Cable Bahamas to know that BTC HAS THE TECHNOLOGY TO OFFER MOBILE AND CABLE TELEVISION and itis only our government that is STOPPING BTC from rolling out this technology so that it may appear that C&W is bringing new products to the Bahamian market.If Cable Bahamas allow this EXCLUSIVITY period for C&W to go UNCHALLENGE in the cellular phone call market while launching a war against Cable Bahamas in the cable television market then i say CABLE BAHAMAS WILL BECOME FINANCIALLY EXTINCT!!! To the other Bahamian investors in Cable Bahamas lets fight for OUR INTERESTS!!!OUR CABLE BAHAMAS MUST BE ALLOW TO COMPETE AGAINST C&W IN THE CELLULAR MARKET FROM DAY ONE,IF WE DON’T INSIST ON THIS THEN WE MUST BE PREPARE TO SEE OUR SHARE VALUE BECOME GREATLY ERODED!!!The Prime Minister said C&W IS A GLOBAL TELECOMM GAINT WELL LET THIS GAINT FIGHT AGAINST OUR CABLE BAHAMAS(DAVID)AND LET MARKET FORCES DETERMINE THE WINNER!!!

    • On the flip side realize (and this is so funny about the conflicting goals of the way the govt holds assets) that NIB is the single largest shareholder of Cable Bahamas’ shares.

      Now just as the govt is trying to protect BTC’s sale price by giving a 3 year exclusivity with the deal and how the prev govt promised a 5 year oen, it would be foolish to sllow Cable’s valuation to tank.

      Now it can take a purely market based appraoch but the problem is govts never really do. There are so much social agenda driven caveats in most of the industries a purely market driven appraoch is never gonna happen.

  3. @ truthhurts

    (1) Anyone paying half attention to that campaign realizes that a sizeable portion of the eligible voters did not participate at the polls. Why?? Is it because they are not turned on by tee shirts, grillin & chillin, free liquor and a “block party” atmosphere for weeks without end – perhaps.

    (2) I recall the FNM (your party) bringing the “kitty” (public treasury) into the equation in an effort to win. Street paving, street light erecting, street signs placement, yard cleaning, houses repairing and pleas and promises from no less a person than the great “Papa” himself. Yet it didn’t translate into votes or a victory overall. Since then “things” (economy, unemployment & general tolerance of the FNM) have further declined. It is therefore reasonable to assume that your FNM has experienced additional “slippage” in general support.

    (3) Remember, your esteemed leader, Hubert Alexander Ingraham, said Elizabeth Estates represented a cross-section of the entire Bahamian society because it contains the low, middle and upper middle classes of voters in it’s various subdivisions (and you dare not disagree cause Papa said so). That being considered, your FNM presented the most decorated and socially admired candidate that you have fielded since Hubert Alexander Ingraham. Still you lost to a political neophyte, and not just that but someone who recently returned to the Bahamas. The only sensible reason to reject Dr. Sands was (don’t miss this point) HE CAME IN THE WRONG NAME (FNM).

    Rather than attempting to change the name that I post under, how about outlining something detailed with reasons for position held. In that way others can follow your logic too (if there is logic to follow). Try that instead of repeating some brain dead talking point that people pick up at party rallies.

    Come on truthhurts this isn’t even at the level of a good sparring match (much less a main event schedule for 12 rounds). I expected better from you – try again.

    • @ STORM

      I think you have done enough damage to the obviously uneducated ‘FNM drone’ “truthhurts” – LOL.

      @ Truthhurts

      The truth is supposed to hurt? What truths have you revealed apart from the fact that you cannot stand up to this REAL ISSUE facing Bahamians today? Nairn (free of charge),is shedding light on the BTC situation in an effort to challenge ‘take what ya get’ Bahamians like YOU to THINK and make your own decisions and you see fit to insult his intelligence. How ignorant of you. Go and spew your talk show jargon somewhere else and only return when you have something valid to say. I banish you – LOL!

  4. Perspectives put forward by Mr. Nairn, Dr. Rollins, Paul Moss and other bright young educated self-affirming Bahamian males provide the much needed ray of HOPE that this country has been missing for years. I eagerly look forward to hearing them share their views, like real 21st century global thinkers on the REAL ISSUES with suggestions for REAL SOLUTIONS that demonstrate that Bahamians (strong young Bahamian men) with true leadership qualities do exist.

    Men that SPEAK THEIR MINDS using rational thought processes…. and let the congregation say ……AMEN! and ….AMEN! and….AMEN! The monkey team of ministers were simply wound up by their puppet master, shoved onto Mr. Jones show and apart from Carl made the predicatble …..holes of themselves and provided the same reasoning they use to “run” their ministries. Go figure.

    After their stellar performance in I don’t know what the heck I am talking about, but I desperately need my Cabinet job, it is no wonder the country’s finances and affairs are in such a disgraceful mess.

    The winds of change smell oh so SWEEEEEET.

    • i understand paul moss saying that he has a office in singapore an he is all against foreigner working here,iguess he has ties there

  5. @ truthhurts

    (1) The grade point average of students in the “Bahamas” should not be mistaken to be the barometer of average intelligence internationally. I think you missed the point (there is another possibility but I won’t go there -LOL).

    (2) Who cares whether or not YOU are impressed with Lindon Nairn. People who demonstrate the ability to THINK are sorely lacking from the decison-making process on a national scale. Hubert Ingraham is passe and this army of young, educated, THINKERS will demonstrate that to you sometime in 2012.

    Much, much more for you at another time, just schedule your appointment one day in advance (RSVP is required).

  6. @ There is One who ever watches

    I RESPECTFULLY DISAGREE WITH YOUR PRONOUNCEMENTS OF GOD’S JUDGMENT OVER THE BAHAMAS. I am almost forced ask the question that Philip asked (do you understand what you are reading).

    I disagree that you have a premise for making this statement because Christianity is a PERSONAL relationship with God by man. NO NATION CAN BE CALLED A CHRISTIAN NATION. We can have the circumstance when many of the citizens of a nation are followers of Jesus Christ, but even that does not constitute NATIONAL SALVATION. JESUS CHRIST HIMSELF WILL COME TO ESTABLISH THE NATIONAL SALVATION THAT YOU ARE REACHING FOR (when he comes to establish his government in the earth as King of Kings and Lord of Lords – all of the existing nations and heads of them will be made subject to him by force).

    How do you expect God to judge this nation for the sins and crimes of unsaved men? What do you propose be done to them if they BY AN ACT OF FREE WILL DECLINE TO ACCEPT JESUS CHRIST AS THEIR SAVIOR? What? Should they be put in jail or executed. Since their sins will be continuous (beacuse they are sinners, and that is what sinners do – sin) how will the problem be solved and God’s judgment be avoided (since sins have produced the requirement for the entire nation to be judged – according to you). Please don’t quote the “If the people that are called by my name would humble themselves, pray ….” verse of scripture because it clearly says the PEOPLE THAT ARE CALLED BY GOD’S NAME, which means the other people (sinners – those not called christians, believers, whatever you prefer) are not being addressed by God. HOW ANYONE WHO CAN HALF-WAY UNDERSTAND THE ENGLISH LANGUAGE AND APPLY THAT VERSE TO NON-BELIEVERS IS BEYOND ME. Even if you say that God wants to hear PERSONAL REQUEST PRAYERS from sinners, I put it to you that His desire is to hear them repent and conform to His ways, moreso than having an natural circumstance addressed. So, sinners will still be HERE AND STILL sinning even after the believers have humbled themselves, prayed, sought God’s face and turned from their wicked ways. This seems to mean God wasn’t talking to the sinners but to the saints. Perhaps, the message is from the church and for the church this time. What ya tink?

  7. bahamians have no idea the mess they’re in. a people who have lost their moral compass, a compromised political system, an ill educated populace, leaders who speak openly of their disdain for the people they were elected to serve and a religious community who are modern day pharisees. truly, judgment will and must come to a nation desperately in such a state. we have made money and things our idols and men who think of themselves as gods are puffed up to the point where they think they are all powerful and can do as they like. there are still enough righteous in this nation who know how to seek the Most High God and judgment will come and the Lord will move. A nation in such a state must be brought to its knees before a soverign God and those religious leaders who have bowed the knee to the false gods of mammon and man will be brought to open judgment. we will see it. we must pray for mercy for a people are being sold out for filthy lucre and the Most High has the record.

  8. @ truthhurts

    Ingraham is the PM BECAUSE WE DO NOT HAVE ENOUGH SMART PEOPLE OUT THERE (deny that).

    We have the kind of voters who thinks that the “issues” should be who can keep the grill going, keep the beers comin, keep the music at the HQs blasting and who can “gee ya boy sometin.” What other outcome do you really expect???

    Lindon Nairn is a GLIMPSE INTO THE FUTURE. IT IS GOING TO TAKE PEOPLE WITH GOOD IDEAS TO GET THIS COUNTRY TO TURN THE CORNER. We (Bahamians) need to get with it because the rest of the Caribbean is already on an education “binge” realizing that EDUCATION IS THE KEY (particularly for countries without natural resources). The world is running on new bright ideas. Those who possess good ideas become borderless people (welcomed everywhere on this planet because they have something to offer) and have no boundaries (in terms of limits on what they can accomplish).

    As I write this post someone else is reading along and wants to put the following question to you, so here goes: truthhurts are you upset at Lindon Nairn because you found his presentation to be “over your head”? (the question asker is an educator and wants you to know that it is written at an average intelligence level).

    • OOOOOOOOOOOH, I’m so insulted. Please. So why you couldn’t articulate the question yourself, my dear. And obviously if this person is an educator then it must written at below average intelligence level, remember the grade point average of children in Bahamian schools is a “D”.

      And no I am absolutley not impressed by the Nairns of society. More at another time.

  9. How come all these “smart” people out there. If they so smart, and Ingraham is the PM, an’ that mean Ingraham smarter than them???

    People, we must all learn one day that Book Smart can NEVER trump Street Smart.

    eso es mis cinco centavos

  10. Cable & Wireless is simply being consistent with their modus operandi. In their quest to become operators in the Panamanian telecommunications market, they made their way through the back door by offering sweetheart deals to government operatives and they are attempting to do the same thing here. The Panamanian Government was in a similar situation. They were in the process of completing a deal with another strategic partner when Cable & Wireless entered the conversation. There is something fishy about this deal. Why, amidst the controversy, the conflict of interest, the apparent flaws in leaders thought processes and the public outcry for oversight and review; it appears that this government intends to push this deal down our throats? This government must have been compromised to the extent that it is impossible for them to back out self-destructing.

  11. My grandmother always told me that there are two sides to EVERY story,so until i see ALL of the bids that were LEGALLY SUBMITTED(before the closing deadline-04.08.2009)i have no choice but to believe the ministers are LYING.These ministers maybe lying by OMITTING FACTS or lying by gross hyperbole(commission).In any event the ministers LACK of understanding FINANCIAL AND TECHNICAL matters DOESNOT inspire confidence.Indeed i think that a CRIMINAL investigation needs to be launch as to how C&W became the preferred buyer,and the person/s involved should be PROSECUTED straight to jail.From my research it can be easily deduced that BRIBERY is the MOTIVE driving this undesirable JONSER sale!!!Also according to THE PUBLIC DISCLOSURE ACT,ALL MEMBERS OF PARLIAMENT,SENATE AND TOP CIVIL SERVANTS ARE OBLIGATED TO DISCLOSE ALL THIER ASSETS EACH YEAR!!!Failure to do so is a CRIME!!!

  12. well written article. You are indeed a good candidate.
    Which area are you running in? I would surely vote for
    you. Just don’t jump ship and join the PLP.

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