Bahamas Information Services Updates BTC Debate Contribution by Prime Minister Hubert Ingraham
Mar 21, 2011 - 12:35:21 PM
Contribution by
Rt. Hon. Hubert A. Ingraham
On Resolution to Privatise BTC
Mr.
Speaker:
Today we commence debate on the final
process required for the privatisation of the Bahamas Telecommunications
Company (BTC). This has been a
long journey commencing with my Party’s determination before the 1997 General
Election to privatise BTC.
In my 9th February
Communication to this Honourable House, I provided background on the
privatisation process beginning in 1997 and leading up to the present. At that time I tabled some 9 documents
in total connected to this exercise including the three primary documents: Share
Purchase Agreement, the Shareholders Agreement and the Sector Policy. And, the following Secondary documents
were also provided to Honourable Members:
1. Know-How/Trade
Mark Licence Agreement
2. Support
Services Agreement
3. Cable &
Wireless Agreement
4. Disclosure
Letter
5. Memorandum
& Articles
6. Memorandum of
Understanding dated 2nd December,
2010.
Also on that occasion, three Bills were
introduced for first reading:
·
A Bill for an Act to Facilitate the Privatisation of The
Bahamas Telecommunications Company and for Connected Purposes.
·
A Bill for an Act to Amend the Communications Act, 2009
·
A Bill for an Act to Amend the Utilities Regulation and
Competition Authority Act, 2009
Today, I am pleased to move the adoption of
these three Bills.
Honourable Members also have for
consideration and adoption two Resolutions, one to confirm the transfer of 9
parcels of land from the Treasurer to BTC, upon or from which BTC operates
business. The first addresses a
question which has arisen regarding the effective transfer of the 9 parcels, notwithstanding
that they have always been and continue to be the site of operation for
BTC. The Resolution seeks to
provide any perfection which may be required.
The second Resolution seeks the approval
of this Honourable House for the privatisation of BTC and the sale of 51% of
its shares to cable and Wireless Communications, Plc (CWC).
Mr. Speaker
I begin by
expressing thanks and appreciation to all persons who worked or work for BTC
and who have had a hand in making this state enterprise – BTC – what it has
done and what it has been doing for The Bahamas during its 45 years of
existence. BTC is now a mature
enterprise and for the past 14 years Governments of The Bahamas have been
seeking to find a partner for it.
The search was extensive and costly.
The public
bidding exercise in 2003 and again in 2010 resulted in unacceptable offers.
And, an
intended engagement days before the last General Election was called off.
We now have a
partner for BTC - CWC.
The Bahamas will
therefore enter into a strategic partnership with an international telecoms giant
in order to further develop our telecommunications sector.
Mr. Speaker:
Between 1966, the year of BTC’s creation
and 1992 – 24 years – it recorded profits of $125.7 million; the Government
received some $10.56 million in dividend payments. For the five year period 1969 and 1974 profits were ploughed
into development and expansion of the Corporation’s plant. Indeed, Batelco’s first dividend
payment to the Government was made in 1977 eleven years following its
establishment.
Batelco, as it was then, made a loss in
1991 and again in 1992. After that
date Batelco recorded a loss again in 1994 and then in 1999. The loss recorded in 1999 amounted to
some $34.1 million and is accounted for by the separation packages offered to
Batelco employees during the exercise of that year-undertaken to prepare it for
privatisation.
Immediately thereafter, BTC began to
operate profitably and to pay the Government handsome dividends. In 2000 net
earning rose to $56.1 million, climbed to $57.4 million in 2001 and totalled
$50.8 million in 2002. In those
three years alone Batelco profits totalled $ 164.3 million, which is more than
it had earned in its 24 year history between 1966 and 1992.
BTC’s earnings for the period 1993 to
2010 totalled $430.40 million.
During the same period $151.40 million was paid to the Government in
dividends as compared with $10.56 million paid between 1966 and 1992.
Mr. Speaker:
The process leading to
privatisation has not been hurried or taken casually. Serious time, money and
effort has been spent over the past fourteen years by Government and its
advisors – experts in telecommunications, in privatisation and in investments –
to ensure that we got this right.
When it was determined that circumstances did not provide a good deal
for The Bahamas, the Government has opted not to proceed.
We have taken BTC to
the altar of privatisation on two separate occasions; once on the watch of
Members Opposite who continued a process which we had commenced, and secondly
following our return to office in 2007.
We have spent enormous
sums of money in the exercise.
Great damage will be done to the image and reputation of The Bahamas is,
after two attempts, we fail to privatise BTC.
We believe, are
soundly convinced, that this deal is a good deal and that this hour is the
appropriate hour for us to move forward on the privatization of BTC.
Mr. Speaker:
My Government’s intention to modernise
Batelco (BTC) has been clearly outlined in each of our General Election
Platforms beginning in 1992. In
that year the Free National Movement outlined in detail a plan to modernise
telecommunications in The Bahamas, introduce cellular service widely and
commence the liberalization of the sector with the introduction of private
vendors and service technicians of telephone equipment including telephone
sets, small key systems, telex and fax, cordless phones and answering
machines. We delivered on our
promise and the many successful private telephone vendors/service operations in
our country today are ample proof.
In 1997 our election Manifesto outlined
our plan to substantially expand and improve telecommunications services
including cellular and Internet services to even the remotest parts of our
archipelago so as to bring long distance services and rates more in line with
what was available to consumers in the United States.
In 2002 we again outlined plans to
continue the upgrade of telecommunication services around the Family Island,
privatise Batelco and fully liberalise the telecommunications sector, and
facilitate the transmission of ZNS television to all populated settlements
around our country. This latter
extension of ZNS television service had been foreshadowed in the agreements
concluded between my Government and Cable Bahamas in 1993 which provided a 15
year monopoly on cable television services to the company but which required
the company to extend its services to all population centres with centrally
provided electricity and telephone services.
My Government was not returned to office
in 2002 but the privatisation process continued as both major political parties
in our country were agreed that improvement to telecommunication services in
The Bahamas required the introduction of a strategic partner. The extension of ZNS television to the
more remote population centres in the Family Islands also continued though not
at a pace that the Free National Movement had hoped for.
The privatisation
process was not completed by Members Opposite before the 2007 General Election
but just days before the election the Cabinet took a decision to sell a 49%
interest and management control of BTC to a company called Bluewater
Ventures. The negotiation and
decision to sell BTC was not disclosed by the Government and though rumoured was
not confirmed until after the elections when my Government made details of the
negotiations public.
I am pleased to inform
that the pace of the extension of cable television service to our remote Family
Island communities was accelerated since 2007 and most recently reached
settlements in the following as indicated:
Table 1:
Family Island Off-Air Project - Deployment Schedule
Location
Projected
Completion Date
Water
& Sweetings Cay, Grand Bahama
March 2011
Rum
Cay
April 2011
Ragged
Island
April 2011
Andros
(North)
May 2011
Crooked
Island
Completed
Mayaguana
Completed
Acklins
Island
Completed
Guana
Cay
Completed
Andros
(South)
Completed
Moore's
Island
Completed
Cat
Island, Arthur's Town
Completed
Cat
Island, The Bight
Completed
Exuma,
Farmer's Cay
Completed
Walkers
& Grand Cay, Abaco
Completed
Mr. Speaker:
When we began to privatisation of BTC
there was a great deal of opposition to it. Eventually some people including Members Opposite began to
mouth that they were in favour of privatisation. Now, very few say they are against it. They say instead that they are against
to whom it is proposed to transfer majority ownership.
To privatise means to go from state
control to private control; to go from State ownership to private ownership.
To say you are in favour of privatisation
but at the same time that you must have majority ownership does violence to the
term privatisation.
All it means is having a part owner to a
state dominated enterprise. It is instructive to know which countries in the
world still have state owned monopolies in telecommunications. There are some 20 such countries:
Andorra
Belize*
Comoros Is.
Cook Is.
Cuba
Djibouti
East Timor
Eritrea
Ethiopia
Falkland Islands
Greenland
Kiribati
Mayotte
Montserrat
Myanmar
New Caledonia
Norfolk Island
North Korea
Rwanda
Solomon Is.
Swaziland and
Tonga Islands.
Mr. Speaker:
The terms of the sale to CWC includes
the following:
$210 million
purchase price, payable in full upon completion
$7 million in
stamp duty to be paid by CWC
a voluntary
workforce restructuring plan, the details of which would be agreed between CWC
and the Government, to be completed by the end of the first year after closing,
with no further reductions for two years
the
submission of a Business Plan to Government
a monopoly on
cellular services for three years, after which a second license could be
issued. A third license could be
issued after five years.
BTC would be
a major part of CWC’s overall regional operations, with substantial Bahamian
participation in management
Veto rights
for the Government as long as it maintains 15% of the issued shares
a replacement
contributory pension scheme for new hires, while the Government would provide a
Feeder Trust of $39 million for existing pension obligations
a projected
completion date of 15 February 2011
CWC would not
be permitted to dispose of any shares for 5 years
Mr. Speaker:
For the easy reference of Honourable
members, I provide a number of comparative tables. The first sets out a comparison of each of the bidders for
BTC outlining how each offer compared including: BahamaTel, BlueTel/Deutsche
Telecom, Trans-World Telecom Bahamas Consortium, Bluewater Ventures Ltd.,
Atlantic Tele Networks/Colina Finacial Advisors, One Equity Partners/Vodafone
and CWC, Plc.
Mr. Speaker:
I wish to say a few words on three issues
of particular merit with regard to the agreements reached with CWC as follows:
Pension
plan. Every single
company that has made a bid for BTC over the last 10 years has made their bid
on the basis that the Government would cover the whole pension plan
deficit. In the case of Bluewater Ventures Limited, the Government agreed
that it would pay off the whole deficit, and that the plan would be closed down
after the transaction closed.
No Tax
concessions.
Bahamian
bids in the past.
There were 3 consortiums that included Bahamians that bid for BTC in the
last 10 years. These are Bahamatel (which had Bahamian pension funds
owning approx 10% of the consortium), Bluetel (some Bahamian investors owning
5% of the consortium) and ATN (CFAL owning 10-15%).The highest financial bid of
all of these for 49% was $153 million, with the pension being paid off by
Government, and management fees in all cases ranging from 1.6 to 4% of
revenues.
Mr. Speaker:
Our decision to enter into partnership with CWC
will increase the choice of Bahamians with regard to provision of services and
indeed an increased choice.
We have made the best choice available in
agreeing to sell BTC..
Our choice is in keeping with the
philosophy of the FNM to expand freedom and choice for the Bahamian people.
It is also in keeping with our desire to
create a shareholding society in which Bahamians can own shares in various
private and public entities expanding their economic choices and freedoms. And we fully intend for ordinary
Bahamians to own shares in BTC just as they own shares in the Bank of The
Bahamas – another 100% Government –owned asset which the FNM Government
determined to permit ordinary Bahamians the opportunity to acquire shares in.
We did it with the Bank, we are doing it
with BTC and we will do it with the new cargo port at Arawak Cay.
Mr. Speaker:
Today’s
debate on BTC in this Chamber is part of an open and transparent process that
has included the posting on line of all of the documents online concerned with
the proposed sale of 51% of BTC to CWC.
Indeed, the very day this Government signed the MOU with CWC it was
publicly announced.
I want to encourage the BTC Unions to
engage with CWC and I encourage the staff of BTC to urge their Union
representatives to engage with CWC.
This can only serve your interests. CWC will become the new majority owners, managers and
operator of BTC; it only makes good sense for you to talk with them.
Sales and Purchase Agreement:
Mr. Speaker:
This week we will end the state monopoly
on telecommunications. Just as we
did in freeing the broadcast media, we will finally end the capacity and
inclination of others to limit the freedom and choices of the Bahamians people
in telecommunications.
In this
decades long battle to free BTC from state control and liberalize the
telecommunications sector, my guiding star has been to expand freedom,
opportunity and choice for the Bahamian people. It will be my great privilege to make these dreams come
through for current and future generations.
The days of state command and control are
nearing the end. We are ushering
in a new dawn of greater freedom and choice in which the people are not
dependent on a political party or government for what they can listen to or
watch or over which media they can so do.