Statement on the Sale of 51%
Interest in BTC to CWC
It is time to bring an end to the deceit that is now becoming a national debate regarding the Government’s decision to sell 51% of the Bahamas Telecommunications Company (BTC) to Cable and Wireless Communications (CWC) and its comparison to an earlier decision to sell 49% of BTC to Bluewater Ventures.
The price agreed with Bluewater was $260 million for 49% of BTC. But there was a net balance of approximately $70 million of BTC’s cash in its bank account at the end of May 2007. There was no allowance in Bluewater’s offer for this cash to be removed from BTC.
Using the same maths we have heard with respect to the Cable & Wireless transaction, this constituted a net cash transaction of $190 million. Of this amount $25 million was deferred for five years and another $15 million deferred for six years.
The net cash therefore, that the country would have received from the Bluewater transaction at the time of closing is $150 million.
The deferred payment of $40 million, which was also interest-free, would have in fact been paid by BTC itself and because of time-value the money would have amounted to less in value than $40 million. The sale price of $260 million was nothing more than a gimmick designed to deceive and mislead.
The net cash to Government of the proposed Bluewater bid would therefore have been less than $190 million. It is deceitful not to openly acknowledge this fact.
In the case of the CWC transaction, the purchase price is $210 million which will be paid at closing plus $7 million in stamp taxes, that is $217 million. And, the Government at closing will receive any net cash in excess of $15 million. Therefore, the net cash benefit to the Government of the CWC transaction will be at least $202 million. No account is taken in this statement of the tens of millions of dollars received by the Government from BTC since the aborted sale to Bluewater as the Government did not intend to sell BTC’s cash.
A comparison of the exclusivity period for the mobile service which has an annual cash value of a very significant amount shows Bluewater was granted an exclusivity period of six years while for CWC the exclusivity period for mobile service is three years.
Regarding the fixed line monopoly, Bluewater was granted an exclusivity period of six years. As for CWC, this issue does not arise since we already liberalized fixed line services and CWC will therefore be in a competitive environment from the beginning of its operation.
Minority vs. Majority Ownership
Much is being made of the issue of sale of 49% against 51% and the implications inherent in the difference.
The principal issue that arises in minority versus majority interest is the element of management and control of the company. In the case of Bluewater the fact is that the management and control was to be given to Bluewater without acquisition of the majority interest.
Bluewater was given control of the Board and of the Company by virtue of its greater number of directors and of the day-to-day management by virtue of its authority to select the Company’s Chief Executive Officer. The important distinction is that Bluewater secured effective majority control without having to pay for it.
Perhaps the most compelling issue for the Bahamian people’s consideration is the issue of credibility of the selection for partnering with BTC in its quest for the transformation of telecommunications networks throughout The Bahamas and assurance of a telecommunications framework that facilitates and supports the economic prosperity of the country.
A comparison of Bluewater and Cable and Wireless is in order.
Firstly, it is not possible to know who Bluewater is because there is no history to refer to. Bluewater was a shell company registered offshore in Jersey in the Channel Islands, and was established in 2003, 140 years after Cable & Wireless commenced operations. It had no financial statements and no organizational support. It only had 2 issued shares of 1 UK pound each. It was previously called Bluewater Communications Ventures Ltd. It changed its name to Bluewater Ventures Ltd. removing the word “Communications”.
As far as we know, given the 2 shareholders are nominee companies, its principal is one individual foreigner who used to be in a communications business, NTL, which went into bankruptcy in 2002. We don’t know who the shareholders are, as this information was never provided to us. It is mind-boggling that a decision was once taken by a Government of The Bahamas to sell BTC to this entity. It is even more astonishing that there are those still bold enough to publicly tout this experience today.
On the other hand, the partner the present Government has selected, CWC, is a substantial telecommunications company with revenues of $2.5 billion, operating in 38 countries, 13 of which are in the Caribbean. It has 8.3 million mobile customers, 1.8 million fixed line customers and 600 thousand broadband customers.
CWC has the economies of scale and the purchasing power to give strong support to BTC in an aggressive competitive environment. There is no doubt that CWC is a market leader, and we are fully convinced, and have seen the evidence, of the enormous transformation that the company has undergone in our region in recent years due primarily to its own conviction that change was essential in the face of competition. On the other hand, Bluewater had no operations at all to our knowledge.
CWC itself will admit to a time in its past of which it is not proud. That it is a different company now is confirmed by the views of others in our region who were once amongst its greatest critics.
The offer from Bluewater is no way comparable to that from CWC. Such a comparison should get no traction from anyone who understands both offers. Going forward the Government will put more of the facts into the public arena. In any event, all facts and documentation will be released to the public two weeks prior to the House of Assembly being called upon to vote on the sale of BTC