ICC acquires 84% of BTL, competition unlikely

The Island Newspaper, Ambergris Caye, Belize            Vol. 14, No. 13            April 8, 2004

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In a brief ceremony held March 31st, 2004, Innovative Communications Corporation (ICC) received shareholding certificates amounting to 84% of the total shares of the Belize Telecommunications Limited (BTL). This total was the combined shares of Carlisle Holdings Ltd., as well as the shares of Belize Social Security.

    ICC paid US$89,729,838 for the shares in BTL. ICC Chairman and Chief Executive Officer Jeffrey J. Prosser, professed that ICC is "committed to investing further in infrastructure with fiber, broadcasting services and the latest in telecommunications technology for residential and business customers. We will work closely with Prime Minister Said Musa and the Belizean Government to assess new growth areas and prioritize where infrastructure is needed."

   Acting Minister of Finance Jose Coye stated, "With this transfer of the shares, we are now about to restore stability to the industry and initiate the process for meaningful competition that will ultimately benefit the Belizean consumers. Indeed, this has always been the primary objective of the Government of Belize in the telecommunications industry."

    Contrary to that, a Channel 7 News interview with Leader of the Opposition United Democratic Party Dean Barrow, (armed with the details of the agreement) disclosed the following about the secret contract for BTLís sale.

   "This deal, in our view, stinks to high heaven from the start. It was conceivedin error and it was compounded in terms of the manner of its implementation."

In brief, the Prosser/ICC concessions are:

* A guaranteed 15% rate of return after profits
* He will not pay the 15% tax on dividends
* He will not pay the stamp duty of 5.4 million dollars on the sale
* He will get an interconnection rate that takes into account his 15% rateof return
* Government will cover, that means pay, any liability that results from a ruling for a refund or other liabilities against GOB
* A tax-free management contract for ICC executives
* Any disputes against BTL will not go to the Supreme Court, but UNCITRAL - theUnited Nations Commission on International Trade Law in Canada.

    By any assessment, itís a lavish assortment of concessions - and the leader of the opposition weighed in mightily against them. First, the guaranteed rate of return.

Hon. Dean Barrow: "In fixing the rates that we must pay; the PUC will always have to ensure that the new BTL makes a return on capital investment of 15% after taxes. Youknow we heard that Prosser was insisting, and I watched what he said on the television that he would re-negotiate the 19% business tax that BTL pays. But, does it matter? Because he is guaranteed a rate of return and government is covenant in here to arrange for the PUC, in setting rates, to set those rates on a basis that will guarantee the new owners of BTL a 15% annum rate of return on capital investments after tax. Altogether, what they are buying from Carlisleand the various government and government-related entities with what they want to buy from the individual shareholders, will amount to a capital investment of around $200 million. Fifteen percent per annum is something like $30 million - I gather than in the best or worst days of Lord Ashcroft, BTL never made that kind of money."

    "This agreement, and in particular, governmentís commitment to give these people the 15% rate of return, is open ended or if I can put it another way - it seems to last for eternity. There is no cap on it. So this 15% will be with us always."

And while the profits should outdo Ashcroft, so will the interconnection deal.

Hon. Dean Barrow: "And it gives to Prosser, interconnectivity on a basis and in accordance with a formula which would assuredly drive the cost of local telephone calls up. I canít stress too much, that this is after government said that itís whole reason for intervening was to take care of this interconnection problem in a manner far more favorable than what Ashcroft was trying to get. But this turns right around and it gives to Prosser interconnection on a basis that, instead of being far more favorable, is far worse."

    And as for the $60 million refund which consumer advocates are trying to recover for over two years of illegally charged rates  well, an indemnity clause puts that problem in governmentís lap.

Hon. Dean Barrow: "Well thatís gone to bed now. Because if that were to be pursued and if it were to be found that consumers are due any reimbursement - it is the government of Belize that will have to pay. You want to bet me that that is the last you'll hear of that case?"

And as for this case  well, the agreement says that if the opposition or anyone else wants to challenge it - they have to get on a plane.

Hon. Dean Barrow: "All disputes arising under this agreement, whether contractual or not, shall be finally settled under the United Nations Commission on InternationalTrade Law in Ontario, Canada. So we canít even appeal to our own courts."

But there should be nothing to go to court about - but according to this agreement, which says, it should remain secret.

Hon. Dean Barrow: "The parties undertake that, subject to the laws of Belize, the terms of this agreement and all information gathered to comply with the terms and conditions,shall be and shall remain confidential to the parties. Didnít the Prime Ministersay that at some future time he would disclose the agreement?"

With all this and supposedly more in what Barrow calls secret side agreement - in the view of the opposition this deal is the worst ever.

Hon. Dean Barrow: "This, clearly, is perhaps the worst agreement, the worst deal, that this government has ever entered into and we know that there is a history of bad deals. So for me to say that, gives you some indication of exactly how strongly the UDP feels about this."

But if it is such a bad deal that sells out consumers interests  why did government sign it  well, the opposition blames it on a poor negotiating setup.

Hon. Dean Barrow: "Government then, at best, was in a position of extreme weakness vis-a-visProsser/Ramphal/ICC. Government had placed itself in that position. You donít buy shares with borrowed money knowing that you then put yourself under pressure to resell as soon as possible and resell, not knowing the concessions you will have to make. So, it is a completely idiotic, and not necessarily of the village type of idiocy, but it is idiotic for government to have done what it did. But,that it was also corrupt, is a conviction that the UDP also firmly holds."

    Channel 7 concluded: A disturbing allegation - and one the opposition will continue to make in every public forum it can, unless government can put out its own spin on the sale and convince a wary public the BTL buyout was not a sellout of consumer interests.

    The opposition maintains that, if elected, it will investigate the sale and reverse it if the negotiations were not above board. It says it will also apply a windfall tax on Prosser. Former Prime Minister Manuel Esquivel also noted that the sale includes shares, which were the pension schemes for the SocialSecurity Board and the Central Bank. That means divesting holdings in a company whose returns are certain to increase with the guaranteed rate of return, and opting instead to bank these for less, about 7%, when in BTL they could fetch at least 30%.

    Chairman of Carlisle Holdings Lord Michael Ashcroft and BTL Board of Directors Chairman Dean Boyce were also on hand to witness the transaction.

    Innovative Communications Corporation, a privately held company, has telecommunications and media operations in the US, and British Virgin Islands, St. Maarten, Guadeloupe, Martinique, France and now, Belize.



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