Bahamas forced to defend C&W telecom deal

THE BAHAMAS government has outlined the terms of the transaction with Cable & Wireless Communications Plc (CWC) for the sale of Bahamas Telecommunications Company Limited, saying it is "time to bring an end to the deceit that is now becoming a national debate" on the sale.

The Ingraham administration is selling 51 per cent of BTC to CWC, a deal replaces an earlier decision to sell 49 per cent of BTC to an entity called Bluewater Ventures.

Under the MOU signed with CWC, it is proposed that the UK company, which already owns operations in 13 Caribbean markets, will acquire 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 - to be calculated at completion of the sale - subject to a normal level of working capital being maintained in the company.

Bluewater would have paid US$260 million for the minority shareholding.

But the Cabinet statement noted that while there was a net balance of some US$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 math we have heard with respect to the Cable & Wireless transaction, this constituted a net cash transaction of US$190 million," said the Cabinet statement.

Of this amount, US$25 million was deferred for five years and another US$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 US$150 million," the government said.

"The net cash to government of the proposed Bluewater bid would, therefore, have been less than US$190 million. It is deceitful not to openly acknowledge this fact."

The government said much is being made of the issue of the sale to the two entities whereas the principal issue 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," the Cabinet said.

"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, the government said, 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.

"First, 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," said the government, headed by Prime Minister Hubert Ingraham.

"It had no financial statements and no organisational support. It only had two issued shares of £1 each."

The company was previously called Bluewater Communications Ventures Limited, but eventually dropped the word 'communications' from its name.

"As far as we know, given the two 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," said the government.

"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."

Defending its decision to take CWC as majority partner, the Ingraham administration said the British telecom was a "substantial company" with revenues of US$2.5 billion, operating in 38 countries - 13 of which are in the Caribbean and that CWC has "8.3 million mobile customers, 1.8 million fixed line customers and 600,000 broadband customers".

Efforts to compare the Bluewater offer with that of CWC's, the Ingraham government said, should get no traction from anyone who understands the transactions.

"Going forward, the Government will put more of the facts into the public arena," it said.

"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."

- CMC