Moody's: BTC talks may hurt telecom competition
Guardian Business Editor
NASSAU A top rating agency says greater government involvement in the telecommunications sector could jeopardize the presence of competition by 2014.
Responding to questions submitted by Guardian Business, Moody's said it was too early to say if the liberalization of the sector will occur on time. However, Gunjan Dixit, assistant vice president at Moody's, noted from London that "greater government involvement in the sector may reduce competition."
Dixit, who co-wrote a damning assessment of the government's upcoming negotiations with parent company Cable and Wireless Communications (CWC), told Guardian Business that the Bahamas Telecommunications Company (BTC) has delivered solid progress in its financial performance, including improved service and product offerings.
"Given that operating performance trends are also positive, we believe that CWC's ownership has added value to BTC," the Moody's analyst added. "This should be reflected in the price for a two percent stake."
The comment could raise a few eyebrows among government officials.
In response to Moody's assessment, Prime Minister Perry Christie said the government would look to buy back two percent of CWC's 51 percent stake at around market value, saying people can "do the mathematics" on what it would cost.
Prominent businessman Dionisio D'Aguilar, an outspoken critic on the BTC saga, said it's likely that the government will be faced with a huge expenditure to re-acquire majority control of the country's only mobile services provider.
While the Progressive Liberal Party (PLP) cannot make a decision without knowing the cost, he doubted whether the negotiations themselves will hold much water.
"I think they're going through the motions. They have to be seen as making a good faith effort," D'Aguilar said. "If it's $100 million for two percent, let's say, people will realize it's not worth it. We are a country of laws, and we have to live by the deal that was struck."
CWC purchased the 51 percent stake of BTC in April 2011 with the former Free National Movement (FNM) administration at the helm.
D'Aguilar further noted that the PLP has incorrectly highlighted the majority takeover of BTC as part of their crucial mandate.
"There are many reasons why people vote for a party. I don't think they received a clear mandate to denationalize BTC. There are many things they sought to do in their platform," according to D'Aguilar.
The Superwash chief urged the government to "move on" and expressed confidence that the PLP will back away from the table once negotiations begin with CWC executives.
Moody's, however, shared a different view with Guardian Business. Dixit said "CWC could be compelled" to sell two percent in exchange for management control.
"In our view, the worse case scenario for CWC would be losing management control at BTC, as it would no longer be able to include BTC in its consolidated financial results," the Moody's analyst added.
In its scathing report last week, Wall Street assigned a double credit negative to the proposed talks between the government and CWC, reportedly slated for sometime this month.
"We don't speak for the international community," Dixit went on, "but will stress that the credit negative impact of a potential nationalization will operate primarily through greater policy uncertainty, which may deter future investment in the telecoms sector."
Michael Halkitis, the state minister of finance, revealed that a conference call is scheduled with Moody's for sometime this week to discuss the government's intentions.
© 2012 The Freeport News