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#411005 - 07/01/11 12:44 PM Telecoms in Belize: Back to the drawing board
Marty Offline
The Economist

The courts overturn a controversial nationalisation

NESTOR VASQUEZ, Belize Telemedia’s executive chairman since 2009, tried to run his country’s dominant telecoms firm as usual on June 27th from its head office in Belize City. But one mile away Dean Boyce, also styling himself executive chairman, sat in a newly established rival office and told bemused employees to take no orders from Mr Vasquez or his team. One page on the firm’s website listed Mr Boyce as chief; another named Mr Vasquez.

This chaotic episode began on June 24th, when Belize’s Court of Appeal ruled that the 2009 nationalisation of Telemedia was unconstitutional. In 2008 Dean Barrow became prime minister. He soon revealed that the government of his predecessor, Said Musa, had signed secret “accommodation agreements” with Belize Telecommunications, which later became Telemedia. The deals limited competition and required the state to make up the company’s shortfall if it failed to earn a 15% return on capital.

In 2000 holding companies controlled by Michael Ashcroft, a member of Britain’s Conservative Party and a life peer who grew up in Belize, bought a controlling interest in Telemedia. Lord Ashcroft’s many businesses in Belize—including BCB Holdings, the parent of Belize Bank, the country’s largest—make him a giant figure in the former British colony, which has 350,000 people and a GDP of $1.35 billion.

Lord Ashcroft’s spokesman has said he had divested himself of all “economic interest” in Telemedia by 2004, and that the firm’s main beneficial owners were an employees’ trust with no elected staff representation and the Hayward Charitable Belize Trust, a Turks and Caicos entity whose trustees are unknown. (Telemedia’s records listed eight corporate parents, five of which shared an address.) But Mr Barrow believed that Lord Ashcroft—whom he called a “determined, ruthless, ambitious enemy”—still controlled Telemedia. Belize Bank had lent Telemedia $22m, while Telemedia owned bonds from BCB firms.

The prime minister first tried to renegotiate the tax clauses with Telemedia. When those talks failed, he got the courts to order the company to make tax payments. Telemedia took Belize to arbitration in London. But the government rejected that arbitrator’s jurisdiction and did not appear, and has not paid the $41m default judgment granted to Telemedia. Parliament then nationalised the company in 2009.

Mr Boyce and BCB Holdings filed a successful appeal. The expropriation was overturned for being arbitrary, disproportionate and lacking proper compensation.

Now it is the turn of Mr Barrow, himself a lawyer, to defend the nationalisation. He argues that the ruling cannot be implemented without a separate enforcement order. He is appealing to the Trinidad-based Caribbean Court of Justice, Belize’s final appeal court. And he plans to get a new, constitution-friendly expropriation passed “in the shortest possible time”—possibly as early as next week.

Meanwhile, control of Telemedia remains up in the air. Within an hour of the ruling Mr Vasquez left the office, and Mr Boyce arrived and held a board meeting. Once it ended, however, Mr Boyce left and Mr Vasquez returned. When Mr Boyce went back to the building late that night, a police guard stopped him from entering.

With monthly bills coming due, even the banks are taking sides. Most will keep sending customers’ payments to Mr Vasquez’s state-run Telemedia office. But Lord Ashcroft’s Belize Bank plans to put incoming payments on hold instead.

#411014 - 07/01/11 01:53 PM Re: Telecoms in Belize: Back to the drawing board [Re: Marty]
Short Offline
A Telemedia Timeline

On Monday when Government goes back to the house to re-nationalise Telemedia - many of you might legitimately ask, how did it come to this?

From our studied observation of the history of BTL - we'd have to say its about money - the company has been one of the most profitable in the country's history - and in the monopoly era it was a legitimate cash cow. Originally, the plan was for those earnings to go back to Belizean shareholders - but in the neoliberal era, influential investors wanted in.

We've put together a very basic timeline. The company was privatized in 1988 - the first utility and first public entity to be privatized in Belize's history.

The company's articles of association were drafted so that no one entity could own more than 24% - but in 1993 - just before the election, the Price Administration signed a letter authorizing companies within the Ashcroft group to act as "permitted persons" - which would own more than 25%.

By 2003, that group's holdings had stepped up to 52% - and with the monopoly expired and Glenn Godfrey's Intelco trying to break into the market, Government bought over the Ashcroft Group's holdings - with the intent to sell to Jeffrey Prosser. In doing so, they did an unusual thing, they signed a buyback clause with Ashcroft; that if the Prosser deal failed - he could buy it back.

Prosser took over in March of 2004 - after the Ashcroft ownership signed an interconnection deal with SPEEDNET in February. Prosser turned out to be a straw man - and he never paid for the shares, so after a great deal of back and forth, in November, Prosser defaulted on a commitment he made with government and Ashcroft took back over - invoking the buy back clause, buying of course at cheaper price.

The Musa Administration was by then only too happy to get the Prosser millstone from around its neck and in September of 2005, they signed a secret accommodation agreement with him. And that's where the real trouble began - because that agreement guaranteed to give the Ashcroft group a guaranteed rate of return - and if it didn't get it, it could withhold tax payments. Those withholdings started in or around January of 2008 - which led Government to take the company to court to recover its taxes.

After another exhaustive round of legal back and forth Government took over the company in 2009. That takeover o led to the events of the past week - and right back to Monday when government will nationalize it for a second time.

Live and let live

#411015 - 07/01/11 01:55 PM Re: Telecoms in Belize: Back to the drawing board [Re: Short]
Short Offline
The Seed Of It all: The Accommodation Agreement

And so what is the accommodation agreement - you've certainly heard it talked about - but few know the details.

In June of 2008 - we got to see this secret document for the first time - and Jules Vasquez reviewed the salient points….

Jules Vasquez Reporting,

This is the accommodation agreement. The principal document is 31 pages and is built around this, government's agreement to cover its Intelco losses by selling 4 former Intelco properties to BTL for $19.2 million. Government also agreed to a 15% minimum rate of return for BTL - and according to schedule 2, that minimum return must be calculated to include, quote "any assets acquired...by BTL in the performance of this agreement." So that means the $19.2 million used to cover Government's Intelco exposure, is to be paid by you the ratepayer, in your phone bill.

And article 11.4 is where all the current problems begin. It notes that in the event that BTL fails to achieve its minimum rate of return, the government has to compensate BTL - and if that isn't paid in full by a specified deadline, then the shortfall "can be set off by BTL against the amount of any taxes including business tax, sales tax or other taxes" payable by BTL to government.

But that's not all the agreement does. There are also 10 other undertakings that make blanket giveaways and concessions to BTL, including government's undertaking that only BTL and Speednet - which is SMART can operate as phone companies in Belize for a period of 15 years. As regards Voice over internet, Government undertook for a period of 15 years that no class license holder is permitted to use voice over internet known as VOIP technology.

And there it is signed in secret by the Prime minister and the BTL Chairman Keith Arnold 19TH September 2005. While PM Musa signed the original his attorney General Francis Fonseca did sign two subsequent and directly related agreements. Those are called the first settlement and the second settlement. These refine and in some cases amplify and in others, attenuate the terms of the original document. But to be clear they form part of a bundle of documents collectively called the Accommodation Agreement.

Live and let live


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