Undoing the BTC deal
By CANDIA DAMES
Guardian News Editor
candia@nasguard.com
Could it be done?
Officials of Cable and Wireless Communications (CWC) appear to have their work cut out for them.
In addition to delivering on all they and the government promised in the months and weeks leading up to the recent controversial closing of the Bahamas Telecommunications Company (BTC) privatization process, they must convince hundreds of BTC workers that CWC is not the enemy, but a caring employer and strategic partner in every sense.
That may be a tough task, but perhaps not an impossible one.
Accepting the defeat that has been handed to them, BTC union leaders have met with CWC representatives to try to iron out the best arrangements for their jittery members.
While it may reach agreement with the previously enraged unions, what is clear is that CWC has found no friend in the Progressive Liberal Party, and if its leader, Perry Gladstone Christie, delivers on what he promises if he wins the next general election, CWC could face more problems that it bargained for.
But that’s if Christie wins, and if he follows through on his warning to undo this deal.
The former prime minister issued the threat to CWC on several occasions, most recently a week ago as the company and the government were preparing to finalize the transaction.
“This is a bad deal,” Christie said.
“The deal stinks and the PLP remains committed to regaining this asset for the Bahamian people and allow the Bahamian public to have a full and public view of the entirety of this transaction.”
But while Christie is sure he would undo the deal, he apparently has not yet settled on how it would be achieved.
Each time he threatened to change the terms of the deal, we carried the warning, but there really was never any indication about what steps he would take to deliver on this promise if he forms the next government.
So National Review decided to ask him.
Christie revealed that he would seek advice from lawyers because it would have to be done legally, of course.
“The mechanics will have to be left to the kind of advice we will get on the matter,” he told us.
“I’m not prepared to comment on those matters.”
Three PLP parliamentarians who are lawyers also told us they are not prepared to speak behind the leader.
One of them said, “We won’t get our messages mixed up on this one.”
So what really would be Christie’s options on this?
Thomas Evans, QC, was not intimately involved in the BTC deal, but has vast knowledge of the law and commercial transactions.
“Because they are the government I suppose they can do whatever they choose,” said Evans, speaking generally about governments.
Evans recalled years back when he was in the Office of the Attorney General.
He was bold enough to write to the government and advise it could not do something.
“I was very quickly rebuffed and told ‘Look, we’re the government. We can do whatever we feel like doing’. That’s true, but there are consequences for certain things that they do.”
Evans pointed out that if one party reneges on an obligation that it assumes in entering a contract, then that violates and encroaches on the other party, and that other party is entitled to sue and recover damages for whatever loss is incurred as a result of the breach.
“So, while the government could go ahead and not perform an obligation which it assumed, there are consequences,” he repeated.
PENALTIES
Another lawyer close to the PLP suggested to us that one way in which a new Christie administration could force a deal change is by reducing the three-year exclusivity period for cellular service.
“CWC would have to determine how that would affect its commercial interest because the deal may no longer be viable,” noted the lawyer who did not want to be named.
“It may give them a commercial impetus to say rather than just paying us the penalty we want out of the entire deal.”
But that would call for hefty penalties.
In its agreement with CWC, the government has agreed “to pay to the purchaser such amount as is equal to the loss, expense, damage or other liability (calculated on the same basis as would be used for determining damages for breach of contract) incurred by the purchaser which arises as a result of a second cellular license being issued prior to the third anniversary of completion, and/or a second and third cellular license being issued prior to the fifth anniversary of completion.”
Under the agreement, the government has agreed to pay CWC $100 million if one or more additional cellular licenses are issued within the next year.
It would have to pay $80 million if one or more licences are issued within the next two years and it would have to pay $40 million if it issues one or more licenses within the next three years.
If the government issues a third cellular license after the third anniversary of the closing of the sale, but prior to the fifth anniversary of completion, it would be subject to a $20 million penalty.
So it would seem unlikely that the Christie administration might want to go this route, but given that Christie has not yet received advice from lawyers, that of course remains unclear.
Evans said if the government decides to go to Cable and Wireless asking for two percent of the shares back, it would likely have great difficulty “because you’ve got a deal.”
“Once a contract has been entered into between two parties it can’t be changed unless you have the consent of both parties,” he explained.
“It can’t be altered. One person can’t unilaterally alter the terms of the contract, even if you are the government.
“So, Cable and Wireless would say ‘Look, the deal I have is a deal. I acquired 51 percent. That’s what I wanted. I am not interested in 49 percent, and I’m just not going to agree.
“I don’t know that there’s any way that the government, even though they’re the government, would be able to compel Cable and Wireless to agree to surrender their two percent.”
Evans said the fact that a new party takes over the government doesn’t change the obligations that were assumed by the previous party because the government is the government.
“A party doesn’t make the government even though the constitution says that after an election the prime minister is the person who is the leader of the party that has the majority in Parliament.
“To that extent there’s a measure of connection between the government and a political party. But the point I’m seeking to make is that the government is the government.”
TAX FRUSTRATIONS
When he spoke in the House of Assembly recently, Golden Gates MP Shane Gibson, who served as a minister in the Christie Cabinet, noted that there are all sorts of creative ways in which a PLP government could pull the rug from under CWC.
Gibson — who served as president of the Bahamas Communications and Public Officers Union (BCPOU) during initial attempts to privatize the then BaTelCo in the 1990s — expanded on those comments when he spoke with us for this piece.
“Obviously Cable and Wireless would have gotten what they consider to be an air-tight agreement from the government,” he said.
“And they are making it very difficult to introduce competition [any time soon] and they are making it difficult to have any other operator come in here, and making it difficult for a new government to be in a position to force them back to the table.
“As I said in Parliament, there are many ways that you can force a company like Cable and Wireless back to the table.
“We can tax them on certain aspects of their income; tax them on certain areas of the different services that they provide. For instance, we could put a special tax on mobile services. They’re the only one who provide mobile services in The Bahamas.
“So we tax them 15, 20 or 30 percent on mobile services, so there are many ways.”
Gibson had another idea.
“If we’re in charge of URCA (the Utilities Regulation and Competition Authority), we could have discussions with URCA and make sure that individuals at URCA, advise them, or encourage them not to allow them (CWC) to go up on rates to offset taxes that they would have on certain parts of income.”
But given that URCA is an independent regulator, that too appears unlikely.
Gibson said that at the end of the day “it is known that the Bahamian public wants nothing to do with Cable and Wireless and they want BTC back in the hands of Bahamians.”
He said Bahamians have been running BTC for decades and “at the end of the day they almost feel that we are going back 100 years”.
“Once certain members of any elite group decide that they want to purchase, whether it is a property or a company, it is very difficult to persuade them to give it back to the people that it belongs to,” Gibson said.
“So it’s important to put it back in the hands of the people.”
CONSTITUTIONAL CONSIDERATIONS
We also asked prominent attorney Brian Moree how Christie might be able to get BTC back in the hands of the people, if he is re-elected.
Moree, who had no involvement in the BTC deal, said given the very strong and very direct comments from Christie, one would assume that he has a legal basis for making those statements.
“It would be surprising that that position would be adopted unless they had the benefit of some advice to suggest that the transaction could be impeached or reversed if they were elected,” Moree said.
“Generally speaking, if you’re going to challenge a transaction of that sort retrospectively or after the event, one would have to look to see if there were any constitutional issues, which would be relevant and whether proceedings on the public law side of the court could be commenced, either by way of judicial review or some other process.”
Constitutional issues were raised by one respondent when URCA was considering the BTC/CWC deal.
That respondent asserted that the proposed exclusivity of the licensee is ultra vires the Constitution of The Bahamas.
The respondent stated that URCA cannot be party to an unconstitutional result and should require the applicants to address the question as to whether or not the exclusivity arrangement offends the Constitution.
URCA said it was aware of discussion of this issue by the Judicial Committee of the Privy Council in the Marpin Case2, a Dominican case in which the Judicial Committee held that a monopoly to control a means of communications can amount to a hindrance of freedom of expression, provided that it is proven that the restriction exceeds that which is reasonably justifiable in a democratic society.
URCA noted that the Committee in that case did not make any conclusive finding, but referred the issue back to the Dominican courts for a consideration of the particular facts in the context of the above test.
“In any event, constitutional issues, such as this, are highly complex and would properly involve significant judicial scrutiny of the facts surrounding the challenged decision. URCA is not the appropriate forum to consider matters of constitutionality of legislation in The Bahamas, and is therefore not competent to determine this point,” URCA said.
Supporters of Christie’s plan to take back a controlling interest in BTC point to similar action taken by Prime Minister of Belize Dean Barrow who in 2009 brought legislation to nationalize Belize Telemedia Limited (BTL) in the public interest.
Barrow promised “fair and proper compensation” and said the move against BTL was not “some cowboy action, but something done in the full plentitude of, and compliance with, our constitution.”
INVESTOR CONFIDENCE
Moree said a degree of responsibility must be attributed to people in public life who make statements concerning these serious matters.
“That is why I said that I assume persons have obtained legal advice to support the position which they have adopted,” he said.
“I’m not aware of that legal advice, so I would not want to speculate.”
While he did not speculate, Moree raised the issue of investor confidence.
“The Bahamas as a sovereign country [must] acknowledge that there has to be a continuity of governance regardless of which political party is in power at any point in time,” he said.
“And when persons are dealing with the Government of The Bahamas, they have to have a level of confidence that their dealings — assuming that they’re lawful and they’re proper and there has been no corruption — they need to have the confidence that if they deal with the government which happens to be the FNM one day, that their transactions aren’t going to be the subject of litigation if another party comes in...”
Gibson said the Christie government has no problem with foreign investors, but is concerned about safeguarding national assets.
“If you look around and you try to identify one single project that this FNM government would have brought to The Bahamas since coming to office in 2007, I don’t think you could do that,” Gibsons aid.
“All of the projects that they are sitting and smiling over right now were projects that were initiated under the Progressive Liberal Party administration.
“And so, we’re not anti-foreign investors. We are anti-Cable and Wireless.”
Gibson said many Bahamians would have welcomed AT&T or T-Mobile, but not as majority shareholders.
“We’re not talking about foreign investors; we’re talking about this specific deal with Cable and Wireless, which seems to be the greatest giveaway ever in the history of The Bahamas,” the MP said.
PLPs would no doubt point to the instances where the Ingraham administration, upon assuming office in 2007 undid some of the deals left in place by the Christie-led government.
The straw market deal, incidentally, which was undone by Ingraham, remains unresolved with some of the professionals who had agreements with the government still waiting to be paid.
Of course, there were no such agreements on the magnitude of the BTC deal, but those actions by the new government led to the popular ‘stop, review and cancel’ phrase tossed about by PLP politicians.
When they took over last week, CWC executives seemed unbothered by Christie’s threats.
“In terms of our operations with government, we have a number of operations with governments across the globe in which we have very successful relations with them,” said Gerard Borely, chief financial officer of LIME, CWC’s regional arm.
“And we have successful relationships with governments no matter who is in power. The reason for that is because we deliver value and service to our consumers and governments, value that they appreciate. And we expect that to continue to be [the case] here.”
4/11/2011
thenassauguardian
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
Showing posts with label BTC workers. Show all posts
Showing posts with label BTC workers. Show all posts
Tuesday, April 12, 2011
Sunday, January 16, 2011
Bahamas Telecommunications Company (BTC) Privatisation: 1999 to 2011
Privatisation of BTC: from 1999 to 2011
By LARRY SMITH
"What I've found out about change is that when you propose it
people don't want it, when you are doing it it's hell, and afterwards
they think it's always been like that."
- former British Prime Minister Tony Blair.
IN EARLY 2008, about 10 months after the last general election, the Ingraham government appointed a new privatisation committee (headed by bankers T. B. Donaldson and Julian Francis), with a mandate to find a buyer for the Bahamas Telecommunications Company as soon as possible.
This was a goal that had been pursued ever since the FNM first came to power in 1992. In fact, even before then the Pindling regime had been seeking to divest state assets that were draining the treasury. By the early 90s the PLP had decided to offload government-owned hotels. And believe it or not, they also had confidential talks with Cable & Wireless about a stake in BaTelCo.
Privatisation continued to be pursued by the PLP during its most recent term in office, from 2002 to 2007. Although the Christie administration eventually cancelled the auction launched by the FNM, they went on to start their own process, and agreed (just before the 2007 election) to sell BTC to Bluewater Ventures, a foreign firm with an uncertain ownership and no operating history.
But the incoming FNM government could find no evidence that a deal had been finalised, although Bluewater - in the shape of American executive John Gregg and PLP politico/lawyer Brave Davis - insisted that the Christie cabinet had shaken hands on an agreement. In mid-2008, the Ingraham administration relaunched the privatisation process, eventually paying Bluewater $1.9 million to cover its out-of-pocket costs.
THE FIRST PRIVATISATION
This was surely a damnable waste of money, but the reasoning behind it was clear. The policy had always been to sell a stake in BTC to a major strategic partner - a company with the technical expertise, operating record, and bulk purchasing power needed to take the corporation to another level. There was no interest in selling to someone who merely had the financial capacity to buy.
In 1999, during the first privatisation exercise, Prime Minister Hubert Ingraham said that if the government simply transferred ownership of BTC to its employees, the corporation would go out of business as soon as it faced real competition. A strategic partner, he said, would enable BTC to compete and move forward in a transformed market.
"We seek to privatise BTC in the national interest," Ingraham said a decade ago, "and we have sought a phased approach to ensure minimal disruption." More recently he said: "We told Bahamians from day one that it was not possible to continue to have a monopoly in the telephone business and we established policies to prepare ourselves. There are hundreds and hundreds of people employed in the telecoms sector who were not so employed before we began to liberalise the market."
Before the government began downsizing BaTelCo in the mid-90s, the corporation had accumulated a workforce of 2100 to accomplish what experts said should require only a few hundred. And this padded payroll was clearly reflected in BaTelCo's dismal performance up to that point.
In 1992 the corporation's revenue was $120.3 million, with a net loss of $1.8 million that year. But after a 50 per cent reduction in staff (based on generous separation packages), BaTelCo's 2001 revenue was $226.4 million, producing a net profit of $57.3 million - almost as much as the corporation had earned over 10 years from 1982 to 1992.
THE CURRENT PROCESS
In 2008, the government appointed an advisory committee to oversee the new BTC sale process, under the chairmanship of State Finance Minister Zhivago Laing. This group would formulate the final recommendations to cabinet from information presented by the privatisation committee (headed by Donaldson and Francis). The leaders of both BTC unions were full members of the advisory committee.
The advisory committee authorised a new BTC auction in mid-2009, with the publication of a notice inviting bidders to register. Qualified parties were asked for technical proposals, and the best of these were invited to submit financial bids. The privatisation committee reviewed the bids and passed them on to the advisory committee for evaluation.
At the same time, major changes to the regulatory environment were being pursued to support market liberalisation. These included legislation to set up a new Utilities Regulation and Competition Authority to govern both broadcasting and telecommunications. In short, the government was totally reforming our antiquated communications laws.
According to the April 29, 2009 minutes of the advisory committee, Minister Laing said the new legislation was the result of "a vast amount of work and represented a new era for the Bahamas" that would bring clarity to what could, and could not, be done in the telecoms industry.
UNION ISSUES
At the July 13, 2009 meeting of the advisory committee, Minister Earl Deveaux recalled that during the first privatisation exercise, BTC workers rejected the decision and responded "in a way that brought great distress to the nation." He asked the union leaders for assurances that this would not be repeated. The BCPMU is the middle managers union. The BCPOU is the line staff union.
At that meeting BCPMU president William Carroll said the major issue for the unions in 1999 had been the separation packages, and that was why workers demonstrated. He added that treatment of staff should be one of the determinants for a successful bid, but went on to acknowledge that BTC employees now accepted the fact of imminent privatisation.
In response to a comment from BCPOU leader Bernard Evans that Bahamian buyers had been excluded from the process, Minister Laing said the search was for a strategic partner who would have the financial and technological resources to "take BTC to the level at which the government wanted it to be." That position did not necessarily exclude Bahamian proposals, but it was unlikely that a Bahamian group would fit the bill.
According to the minutes, Minister Carl Bethel said the government wanted a strong international connection, a company with experience in all areas of telecommunications and with the financial strength and operating platform to be able to support BTC's infrastructure and mission. He questioned whether any Bahamian entity possessed those qualities.
Minister Laing said that unlike the previous attempt, this time the government was not seeking to shape the product that was on offer, outside of its conviction that privatising BTC would be better for the country, for the economy, and ultimately for the workers. The government was reforming the regulatory environment and selling BTC as it exists today, and the role of the advisory committee was to determine the best buyer.
CABLE & WIRELESS
The BTC auction notice attracted six initial responses, and four were invited to submit bids. Only two were received by the December 11, 2009 deadline - from JPMorgan Chase's private equity arm and from Atlantic Tele-Network, a consortium that included Colina Financial Advisors. Neither was considered to have met the government's criteria.
According to minutes of the July 23, 2010 meeting, the advisory committee unanimously rejected both bids as "departing significantly in their requirements and expectations from the conditions acceptable to the government."
The committee was then informed by Julian Francis that, following its recent restructuring, Cable & Wireless had expressed an interest in BTC. While both union leaders had reservations about C&W in terms of employee relations, the advisory committee unanimously endorsed a recommendation to engage in talks with the company, which is a major regional and international telecoms operator.
In October of last year, the advisory committee met for the final time to consider the report of the working committee on its talks with Cable & Wireless. According to Julian Francis, a non-binding memorandum of understanding had been drafted that valued BTC at $400-450 million, based on a two-year exclusivity period.
"However, Cable & Wireless believes that an extension may be necessary for BTC to prepare for competition, which would be aggressive given the low threshold for investment under the new regulatory regime," Francis said. "In comparison, the Bluewater proposal was for a five-year exclusivity period for mobile, with each year being valued at between $60-70 million by the committee's advisors."
THE MEMORANDUM OF UNDERSTANDING
Francis said the MOU called for Cable & Wireless to produce a five-year business plan acceptable to government before a deal could be closed. This plan would spell out Bahamian involvement in the management of BTC and Cable & Wireless' international operations.
Going forward, he said, the government wanted to have a veto over remuneration, staff cuts, the sale of assets and the location of operations. According to Francis, Cable & Wireless was "convinced that BTC should be run by a Bahamian and the government had indicated that management must remain in the Bahamas."
Both union leaders reiterated their focus on job protection, but Minister Deveaux pointed out that taxpayers wanted better service. Sir William Allen, the government's economic advisor, said technology would continue to erode whatever advantages BTC currently had, even if the market was not liberalised.
With respect to workforce restructuring, BCPOU leader Bernard Evans said "voluntary separation packages are an acceptable option once the terms are suitable." Minister Laing responded that there was room for standstill, with compulsory reductions tied to the end of the exclusivity period. Both union leaders agreed that a three or four year exclusivity period would be "more manageable" in this regard.
The advisory committee agreed to recommend only voluntary staff cuts prior to the end of the exclusivity period, and urged government to extend this period "to help with job preservation in the short term." In a closing note, the October minutes recorded that the committee's recommendations would be passed to government for a final decision, with Minister Laing satisfied that that "all major issues have been discussed and agreement reached."
On December 2, the government announced the signing of the memorandum of understanding, as recommended by the advisory committee, on the same day it was signed. Talks then began to develop more precise contract language to clarify all issues. The agreement included a three-year exclusivity period for mobile and a voluntary workforce restructuring.
POLITICAL RESISTANCE
But within days of that announcement, the two union leaders and the PLP had begun a drumbeat of opposition to the deal - which was already 13 years too late. "This is just not the right time," said BCPOU leader Evans. "We don't support Cable & Wireless - period." He insisted that separation packages offered to workers should be more than BTC employees got in 1999 (which cost the country some $90 million), and should be enough to last workers a lifetime.
According to the prime minister, "the PLP agreed just before the election to sell BTC to a foreigner, who some think was fronting for some of them. And they never told the public a single word that they agreed to sell BTC. The reality is that the union and the PLP are at one in their fight against this exercise. And you can figure out why the PLP, which agreed to sell to a one-man show, is now opposed to selling to a $2.5 billion publicly traded company that operates around the world.
As the minutes of the advisory committee show, the plain fact is that the union leaders were part and parcel of the entire privatisation process, and after seeking concessions from the government they signed off on the major components of the memorandum of understanding.
"We went out of our way to protect jobs at BTC to the public's disadvantage," the prime minister told a meeting in Grand Bahama recently. "As night follows day, rates are high because BTC has more people employed than they need, and they are seeking to protect what they have because there's plenty juice there for them."
As for the prospects of general strike similar to that which occurred in 1958, it seems clear that the BTC unions' action is a greedy attempt on the part of special interests to hold the nation to ransom rather than a struggle for democracy. And as for the question of Bahamian as opposed to foreign ownership, why hasn't this been raised before?
What do you think?
Send comments to
larry@tribunemedia.net
Or visit www.bahamapundit.com
January 12, 2011
tribune242
By LARRY SMITH
"What I've found out about change is that when you propose it
people don't want it, when you are doing it it's hell, and afterwards
they think it's always been like that."
- former British Prime Minister Tony Blair.
IN EARLY 2008, about 10 months after the last general election, the Ingraham government appointed a new privatisation committee (headed by bankers T. B. Donaldson and Julian Francis), with a mandate to find a buyer for the Bahamas Telecommunications Company as soon as possible.
This was a goal that had been pursued ever since the FNM first came to power in 1992. In fact, even before then the Pindling regime had been seeking to divest state assets that were draining the treasury. By the early 90s the PLP had decided to offload government-owned hotels. And believe it or not, they also had confidential talks with Cable & Wireless about a stake in BaTelCo.
Privatisation continued to be pursued by the PLP during its most recent term in office, from 2002 to 2007. Although the Christie administration eventually cancelled the auction launched by the FNM, they went on to start their own process, and agreed (just before the 2007 election) to sell BTC to Bluewater Ventures, a foreign firm with an uncertain ownership and no operating history.
But the incoming FNM government could find no evidence that a deal had been finalised, although Bluewater - in the shape of American executive John Gregg and PLP politico/lawyer Brave Davis - insisted that the Christie cabinet had shaken hands on an agreement. In mid-2008, the Ingraham administration relaunched the privatisation process, eventually paying Bluewater $1.9 million to cover its out-of-pocket costs.
THE FIRST PRIVATISATION
This was surely a damnable waste of money, but the reasoning behind it was clear. The policy had always been to sell a stake in BTC to a major strategic partner - a company with the technical expertise, operating record, and bulk purchasing power needed to take the corporation to another level. There was no interest in selling to someone who merely had the financial capacity to buy.
In 1999, during the first privatisation exercise, Prime Minister Hubert Ingraham said that if the government simply transferred ownership of BTC to its employees, the corporation would go out of business as soon as it faced real competition. A strategic partner, he said, would enable BTC to compete and move forward in a transformed market.
"We seek to privatise BTC in the national interest," Ingraham said a decade ago, "and we have sought a phased approach to ensure minimal disruption." More recently he said: "We told Bahamians from day one that it was not possible to continue to have a monopoly in the telephone business and we established policies to prepare ourselves. There are hundreds and hundreds of people employed in the telecoms sector who were not so employed before we began to liberalise the market."
Before the government began downsizing BaTelCo in the mid-90s, the corporation had accumulated a workforce of 2100 to accomplish what experts said should require only a few hundred. And this padded payroll was clearly reflected in BaTelCo's dismal performance up to that point.
In 1992 the corporation's revenue was $120.3 million, with a net loss of $1.8 million that year. But after a 50 per cent reduction in staff (based on generous separation packages), BaTelCo's 2001 revenue was $226.4 million, producing a net profit of $57.3 million - almost as much as the corporation had earned over 10 years from 1982 to 1992.
THE CURRENT PROCESS
In 2008, the government appointed an advisory committee to oversee the new BTC sale process, under the chairmanship of State Finance Minister Zhivago Laing. This group would formulate the final recommendations to cabinet from information presented by the privatisation committee (headed by Donaldson and Francis). The leaders of both BTC unions were full members of the advisory committee.
The advisory committee authorised a new BTC auction in mid-2009, with the publication of a notice inviting bidders to register. Qualified parties were asked for technical proposals, and the best of these were invited to submit financial bids. The privatisation committee reviewed the bids and passed them on to the advisory committee for evaluation.
At the same time, major changes to the regulatory environment were being pursued to support market liberalisation. These included legislation to set up a new Utilities Regulation and Competition Authority to govern both broadcasting and telecommunications. In short, the government was totally reforming our antiquated communications laws.
According to the April 29, 2009 minutes of the advisory committee, Minister Laing said the new legislation was the result of "a vast amount of work and represented a new era for the Bahamas" that would bring clarity to what could, and could not, be done in the telecoms industry.
UNION ISSUES
At the July 13, 2009 meeting of the advisory committee, Minister Earl Deveaux recalled that during the first privatisation exercise, BTC workers rejected the decision and responded "in a way that brought great distress to the nation." He asked the union leaders for assurances that this would not be repeated. The BCPMU is the middle managers union. The BCPOU is the line staff union.
At that meeting BCPMU president William Carroll said the major issue for the unions in 1999 had been the separation packages, and that was why workers demonstrated. He added that treatment of staff should be one of the determinants for a successful bid, but went on to acknowledge that BTC employees now accepted the fact of imminent privatisation.
In response to a comment from BCPOU leader Bernard Evans that Bahamian buyers had been excluded from the process, Minister Laing said the search was for a strategic partner who would have the financial and technological resources to "take BTC to the level at which the government wanted it to be." That position did not necessarily exclude Bahamian proposals, but it was unlikely that a Bahamian group would fit the bill.
According to the minutes, Minister Carl Bethel said the government wanted a strong international connection, a company with experience in all areas of telecommunications and with the financial strength and operating platform to be able to support BTC's infrastructure and mission. He questioned whether any Bahamian entity possessed those qualities.
Minister Laing said that unlike the previous attempt, this time the government was not seeking to shape the product that was on offer, outside of its conviction that privatising BTC would be better for the country, for the economy, and ultimately for the workers. The government was reforming the regulatory environment and selling BTC as it exists today, and the role of the advisory committee was to determine the best buyer.
CABLE & WIRELESS
The BTC auction notice attracted six initial responses, and four were invited to submit bids. Only two were received by the December 11, 2009 deadline - from JPMorgan Chase's private equity arm and from Atlantic Tele-Network, a consortium that included Colina Financial Advisors. Neither was considered to have met the government's criteria.
According to minutes of the July 23, 2010 meeting, the advisory committee unanimously rejected both bids as "departing significantly in their requirements and expectations from the conditions acceptable to the government."
The committee was then informed by Julian Francis that, following its recent restructuring, Cable & Wireless had expressed an interest in BTC. While both union leaders had reservations about C&W in terms of employee relations, the advisory committee unanimously endorsed a recommendation to engage in talks with the company, which is a major regional and international telecoms operator.
In October of last year, the advisory committee met for the final time to consider the report of the working committee on its talks with Cable & Wireless. According to Julian Francis, a non-binding memorandum of understanding had been drafted that valued BTC at $400-450 million, based on a two-year exclusivity period.
"However, Cable & Wireless believes that an extension may be necessary for BTC to prepare for competition, which would be aggressive given the low threshold for investment under the new regulatory regime," Francis said. "In comparison, the Bluewater proposal was for a five-year exclusivity period for mobile, with each year being valued at between $60-70 million by the committee's advisors."
THE MEMORANDUM OF UNDERSTANDING
Francis said the MOU called for Cable & Wireless to produce a five-year business plan acceptable to government before a deal could be closed. This plan would spell out Bahamian involvement in the management of BTC and Cable & Wireless' international operations.
Going forward, he said, the government wanted to have a veto over remuneration, staff cuts, the sale of assets and the location of operations. According to Francis, Cable & Wireless was "convinced that BTC should be run by a Bahamian and the government had indicated that management must remain in the Bahamas."
Both union leaders reiterated their focus on job protection, but Minister Deveaux pointed out that taxpayers wanted better service. Sir William Allen, the government's economic advisor, said technology would continue to erode whatever advantages BTC currently had, even if the market was not liberalised.
With respect to workforce restructuring, BCPOU leader Bernard Evans said "voluntary separation packages are an acceptable option once the terms are suitable." Minister Laing responded that there was room for standstill, with compulsory reductions tied to the end of the exclusivity period. Both union leaders agreed that a three or four year exclusivity period would be "more manageable" in this regard.
The advisory committee agreed to recommend only voluntary staff cuts prior to the end of the exclusivity period, and urged government to extend this period "to help with job preservation in the short term." In a closing note, the October minutes recorded that the committee's recommendations would be passed to government for a final decision, with Minister Laing satisfied that that "all major issues have been discussed and agreement reached."
On December 2, the government announced the signing of the memorandum of understanding, as recommended by the advisory committee, on the same day it was signed. Talks then began to develop more precise contract language to clarify all issues. The agreement included a three-year exclusivity period for mobile and a voluntary workforce restructuring.
POLITICAL RESISTANCE
But within days of that announcement, the two union leaders and the PLP had begun a drumbeat of opposition to the deal - which was already 13 years too late. "This is just not the right time," said BCPOU leader Evans. "We don't support Cable & Wireless - period." He insisted that separation packages offered to workers should be more than BTC employees got in 1999 (which cost the country some $90 million), and should be enough to last workers a lifetime.
According to the prime minister, "the PLP agreed just before the election to sell BTC to a foreigner, who some think was fronting for some of them. And they never told the public a single word that they agreed to sell BTC. The reality is that the union and the PLP are at one in their fight against this exercise. And you can figure out why the PLP, which agreed to sell to a one-man show, is now opposed to selling to a $2.5 billion publicly traded company that operates around the world.
As the minutes of the advisory committee show, the plain fact is that the union leaders were part and parcel of the entire privatisation process, and after seeking concessions from the government they signed off on the major components of the memorandum of understanding.
"We went out of our way to protect jobs at BTC to the public's disadvantage," the prime minister told a meeting in Grand Bahama recently. "As night follows day, rates are high because BTC has more people employed than they need, and they are seeking to protect what they have because there's plenty juice there for them."
As for the prospects of general strike similar to that which occurred in 1958, it seems clear that the BTC unions' action is a greedy attempt on the part of special interests to hold the nation to ransom rather than a struggle for democracy. And as for the question of Bahamian as opposed to foreign ownership, why hasn't this been raised before?
What do you think?
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January 12, 2011
tribune242
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