October 21, 2015
While Cable Bahamas Ltd. (CAB) has won the spectrum auction and must now satisfy the final preconditions for licensing, the Cellular Liberalization Task Force (CLTF) said the process has now begun that may end with cooperative credit unions, public and private pension funds owning a piece of the holding company that will own the company that gets the second mobile license. The arrangement has been called complicated, but it is intended to ensure that the telecommunications assets remain majority owned by the Bahamian public.
HoldingCo is the entity (incorporated) that will own the majority shareholding in NewCo "on behalf of the Bahamian people". NewCo is the entity that will receive the license from the Utilities Regulation and Competition Authority (URCA) to provide cellular mobile services. In the CLTF request for proposals (RFP), NewCo's 100 percent shareholding will be split so that 49 percent of the shares will be held by the successful applicant - Cable Bahamas - and 51 percent of the shares will be held by HoldingCo.
HoldingCo's shareholding will be owned by Bahamian investors. PricewaterhouseCoopers (PwC) is advising the CLTF on the matter of HoldingCo and soliciting investors, and PwC Partner Gowon Bowe told Guardian Business that the intent had been from the beginning of the RFP process to ensure the broadest participation of "the common man" in the business venture being created in the form of HoldingCo.
"Also tied to that was a reluctance, as you can imagine, from private sector entities that would be entering the race in order to be in a business venture with the government because they were representing the people, or the broad Bahamian ownership," he said.
"So what was agreed was a holding company structure which ultimately is intended to be an investment vehicle that will allow for this entity to participate in other public/private partnerships where there is an interest for Bahamians to have an opportunity to pool resources and actually participate in bigger transactions that would require pooling of resources."
The HoldingCo construct for cellular liberalization is said to achieve the objective of having the broadest possible Bahamian ownership, but as Bowe pointed out, the sums involved are considerable. This creates what Bowe called a "delicate balance" between a retail offering to the man on the street who has a bit of an appetite for some risk - given that the first years will be loss-making before reaching the break-even point and the ability to make a return.
"So what we have focused on as a task force is achieving the same objective but looking at it through institutions that would represent broad ownership. To give an example, the hotel pension plans represent a large number of Bahamians, but the institution is an institutional investor that would provide the ability to keep the placement at this point in time as a private placement but have the beneficial ownership be very broad," he explained.
Other such investors would likely be the cooperative credit unions, pension funds.
"The ultimate intent of the holding company (HoldingCo) is to make it available to the public at large with a distribution model akin to APD (Arawak Port Development), where everyone who applies will get their allotted shares that are at the base. So it is going to be very carefully managed to insure that there are no holding blocks, or no investor blocks, that are going to have a large interest and be able to control this and be seen as the select few."
"If there is an institutional investor, that will be an investor that may be managed by a group of individuals but it is for the benefit of the larger beneficiaries," Bowe said.
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