First published in The Tribune February 8, 2011 and posted here with the kind permission of the author.
Here are eight simple reasons why BTC [Bahamas Telecommunications Company] must go through the wringer of total change. I found them one weekday morning by calling these numbers listed on the “Service Page:” of the 2010 Directory:
914, Repairs – constant busy signal. (Yes, 917 did give me the time of day.)
322-5190, Customer Care Department – no answer, fax signal sounds.
394-7616, Wireless Services – no answer after 20 rings.
300-1254, Marketing Department – constant busy signal.
394-7685, BaTelNet (Internet Services) – no answer after 20 rings.
300-2638, Technical Support – constant busy signal.
394-1714, Enterprise Sales – number not in service.
225-5282, Help Line – answered, but no response given to accounts query.
The wringer of change chosen by Prime Minister Ingraham is the sale of 51% of BTC to Cable & Wireless Communications Ltd (“CWC”). Opposition to this course has sprung from many quarters, some intelligent, others hysterical. In the latter category can be found our King of Bombast, PLP [Progressive Liberal Party] Chairman Bradley Roberts, who without a shred of evidence claims that “someone” is getting a 3% finder’s fee from the CWC deal, resulting from a “bogus” privatization process. The unsinkable Punch columnist Niki Kelly is another member of this faction. Seeking a new cause after her failed campaign to torpedo Baha Mar [a major hotel project], she has strung together a farrago of irrelevant claims about conflicts of interest, job advertisements, and timing of bids. So CWC did not submit before the original bid dead-line. So what? After Julian Francis’ Privatization Committee found all the submitted bids (including one Bahamian) inadequate, why should they not invite the proposal of a new party?
Neither of these two “opinion-leaders” put forth any positive views about what should be done with BTC, but simply attacked CWC. Presumably they believe our telephone company does not a need a new owner and can simply be left in the hands of present Government-controlled management, which has had 40 years to fix the service failings listed above – and many others known to any telephone user.
Other opponents of the sale take a more thoughtful approach. Mr. Shayne Davis in a lengthy letter to the Tribune does not object to privatization, but insists that it must be a Bahamian privatization. The crux of his argument is that “there are enough talented and serious Bahamians, and enough capital around, to get a local group in place who will improve the fortunes of BTC.” This is an unrealistic view of what makes for an effective company. A long and coherent history of corporate teamwork and expertise is needed, not simply a cobbling together of money and miscellaneous individuals, no matter how “talented” and well-intentioned.
A similar approach was taken by Mr. Bernard Evans, President of our Communications and Public Officers Union, accepting that some form of privatization was inevitable and desirable. In the course of a long and friendly interview, he had plenty of criticism for the BTC Board of Directors for holding back progress, and gave his own vision of the company’s future. He drew me a diagram showing that Government should retain ownership of infrastructure and that four privately-owned companies should be created, each separately taking on the service functions of land-line, mobile, data, and internet. It’s an intriguing prospect that might work in an ideal world, but the actualities of Bahamian management and finance would impose interminable delays in creating such a complex structure.
And of course he remains implacably opposed to CWC. Without using any of the lame and emotive jingoist phrases like “working for our colonial masters” or “becoming slaves of the white man again”, he produced several specific objections to their controlling ownership, citing bad labor policies (the loss in the Privy Council of an employee compensation case in Antigua) and weak financial position, citing a “sell” recommendation for the company’s publicly traded shares by a London stockbroker. He first told me he would refuse to negotiate with CWC on labor issues, but when I pressed him what he would do if the transaction were actually completed, he smiled and said “I’ll cross that bridge when I come to it”.
CWC is not a perfect company. My own conversations with independent securities analysts in the UK and the US revealed opinions that the group may have excessive debt, may be unable to maintain its high dividend yield, and suffers severely from tourism declines and effects of the recession throughout the Caribbean. One analyst remarked on the loss of cellular phone business in Jamaica to their more nimble competitor Digicel, while pointing out that recent CWC management changes should be able to partially recapture this loss. Mr. David Shaw, CWC’s CEO for the Caribbean area admitted to me that Jamaica had been a sore spot where they had learned a lesson.
But against these few negatives, must be balanced the factors that make CWC the best candidate to take control of BTC. Larger and stronger telcom companies, like Verizon in the US, or Telefonica in Spain and Latin America, have shown little interest in the Caribbean and have no track record in the region. CWC was created in March 2010 as a separate company, quoted on the London Stock Exchange, when it took its long-existing international operations and split them off from the parent UK company that does a very different type of business.
CWC’s international range is impressive. With ultimate headquarters in London, it operates through four semi-autonomous divisions: Caribbean (now re-branded as “LIME”), with about 34% of group revenues totaling $1,160 billion; Panama, about 25%; Monaco and various island nations, about 25%; and Macau, about 15%. The cross-fertilization of ideas, technology, and human expertise among these varied markets would be hard to match, certainly not by any stand-alone Bahamian company as urged by local enthusiasts. In the Caribbean, CWC operates in 13 national markets, competing in all of them, and in all cases dominant in land-line networks. This structure permits CWC to undertake inter-island projects such as submarine cables, the latest one linking Jamaica and islands of the eastern Caribbean. The group’s size provides it with advanced technology and volume discounts that will reduce the high prices for products and services now paid by BTC customers.
CWC has had periodic labor problems, but has always continued to negotiate with unions, and none of its Caribbean markets experience crippling shut-downs or nationwide strikes arising from telecoms disputes. Naturally, control by CWC will involve some personnel changes and downsizing at BTC, but nothing like the mass dismissals warned by our nay-sayers. As pointed out by Mr. Evans, the average age of BTC employees is 47, so many of them will soon be eligible for early retirement. Senior management has been working amicably on due diligence details with visiting CWC executives and technical experts for over a month, to plan an easy transition. As in neighboring countries, CWC will follow the sensible practice of retaining management familiar with our special Bahamian market-place, while importing foreign staff with special expertise not yet available here.
Much criticism has been made of the $210 million price for 51% as a “give-away”, unfair to the Bahamian people. In 2009, the latest reported fiscal year, BTC’s net income was roughly $48 million; 51% of that amount is about $25 million, giving an acquisition price/earnings ratio of 8.4X, which is a fair figure for an overstaffed company that will only enjoy its monopoly status for another three years. Would any Bahamian investor pay more than 8.4X if he were offered the shares today
Theoretically, the deal could be stopped in its tracks if the courts support the injunction filed by Mr. Evans’ union. But that appears unlikely, since I understand it’s based on the eccentric theory that Government has no authority to sell its shares – a position that would virtually paralyze the sovereign powers of the State. The threats of a general strike uttered by Mr. Evans and other union leaders are not credible. A general strike, bringing the economy to a dead halt, can only succeed if backed by the populace as whole. It’s pretty clear that the Bahamian public, chronically dissatisfied with BTC, is not going to jeopardize the national welfare just to save the jobs of a few hundred union members and glorify Mr. Bradley Roberts.
The issue will be decided, quite rightly, in the political arena. Presumably Mr. Ingraham’s iron control of his party will result in the FNM [Free National Movement] majority winning the crucial majority vote in the House of Assembly. Mr. Ingraham is in a hurry, understandably, to close this long-festering issue on his watch before next year’s election, and has no interest in a late search for a company to replace CWC.
Buried deep in BTC’s glossy Annual Report, a dry financial item reveals how Government has used the company for political purposes.. In 2009, BTC paid dividends of nearly $96 million (twice what it earned) to “the Shareholder” (i.e. Government); of this amount nearly $16 million was not paid in cash but as “Settlement of Receivables”, a polite way of describing the write-off of uncollectible telephone bills owed by dead-beat Government agencies or political pals. Under private ownership, this type of shady cronyism should become a thing of the past.
The views expressed are those of the author, and not necessarily those of the Nassau Institute (which has no corporate view), or its Advisers or Directors.
Mr. Coulson has had a long career in law, investment banking and private banking in New York, London, and Nassau, and now serves as director of several financial concerns and as a corporate financial consultant.