Bahamas: Telecom sale moves forward

ICT

Economic News

18 Mar 2011
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The long-stalled privatisation of the Bahamas Telecommunications Company (BTC) appears one step closer to completion, with global operator Cable and Wireless Communications (CWC) set to take a controlling interest in the Bahamian firm in April, although the move has not been without its critics.

On February 9, Prime Minister Hubert Ingraham announced in parliament that the government and CWC had signed a memorandum of understanding. According to the terms of the agreement, the UK-registered firm will pay $210m for a 51% interest in BTC, along with an additional $7m in stamp tax.

During his presentation to members of parliament, the prime minister said that one of the key reasons for the partial privatisation of BTC was its need to be overhauled and turned into a modern and competitive operator. According to the prime minster, BTC would struggle in a liberalised market and was in need of a “sustained and significant ongoing capital expenditure programme” to make it more effective and efficient.

The plan to privatise part of BTC is by no means a recent decision, with the idea first discussed in 1992, but it has taken nearly 20 years to find a suitable partner and make the sale a reality. According to James Smith, a former finance minister, one sticking point in the past had been the government’s insistence on retaining a majority stake in BTC, only offering 49% of the company for sale to prospective partners.

The day that the terms of the sale were announced, CWC’s chief executive officer, David Shaw, told local media that his firm intended to raise standards when it entered the Bahamas market and ensure that BTC was positioned so that it could adapt and grow in the fast-changing world of telecoms.

“We have to lower prices, whether that is domestic or roaming, and we have to improve service so that customers can access BTC in many more ways than they can today and provide better services to the business community as well as social telecoms with the government,” he said.

Shaw also sought to reassure those who opposed the deal, saying that the company was committed to the local community.

“Now I know that some people may be nervous about a new owner at BTC, and at Cable and Wireless we know that it is our job to show them that we, in the long run, want the same thing – a healthy competitive enterprise, focused on providing the best service to the Bahamian people and fulfilling careers for our Bahamian colleagues,” he said.

BTC should be a good fit for CWC, which already has extensive holdings throughout the Caribbean, with operations on 13 islands, as well as business units based in Panama, Macau and Monaco. BTC currently serves 123,000 fixed-line customers and 388,000 mobile subscribers, which does not leave much room for growth in traditional areas of operation. However, with just 19,000 broadband customers, CWC has an opportunity for expansion in the provision of internet access.

The CWC deal has not gone unopposed, however, with the Progressive Liberal Party (PLP) voicing strong criticism. According to the PLP, the Ingraham administration has undervalued the national telco, especially given that the state is committed to pay $39m to protect the company’s existing pension fund and to leave a further $15m in cash in BTC’s accounts.

Trade unions have also objected to the acquisition by CWC. Labour groups, especially those whose members work for BTC, are concerned that the new managers may look to trim staff numbers and reduce costs at the expense of employees.

In mid-January the Bahamas Communication and Public Officers Union (BCPOU) and the Bahamas Communication and Public Managers Union (BCPMU) filed a lawsuit, seeking an injunction to stop the sale. On February 14, the Supreme Court ruled that the unions did not have legal standing to sue. However, the unions immediately filed an application to appeal, which was approved on February 21. A date for the hearing of the appeal has yet to be set.

The sale also must be approved by the Utilities Regulation Competition Authority (URCA), the regulatory agency for the industry, and be ratified by parliament, following debates scheduled for March. If, as forecast, the government’s majority is able to secure passage of the privatisation, the final transfer of shares to CWC is expected to be made in early April, although legal hurdles could delay this process.

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