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.
With these words I move….
Click HERE to see Blue Water Offer Terms For BTC.
Click HERE to see a comparison of offer terms for BTC.
