BitDepth #980 originally published on March 16, 2015
Last week the Telecommunications Authority of Trinidad and Tobago (TATT), issued it’s first statement one the application by Columbus Communications Trinidad Limited (CCTL) for a change of control resulting from the proposed acquisition of its parent body, Columbus International by Cable and Wireless plc (CWC).
What follows is a parsing of the lengthy and sometimes legally convoluted document .
The authority noted that it’s deliberations and decisions would proceed “bearing in mind that such approval should not be unreasonably withheld.”
After examining the situation, TATT the Authority found that as a result of WC’s 49 per cent shareholding in TSTT, “substantial lessening of competition or adverse effects may reasonably be expected to result from the proposed acquisition of Columbus by CWC.”
As a consequence, the application for control was denied.
Columbus and CWC “requested a reconsideration” of the decision and on March 11, 2015, was notified that after a TATT board meeting, the authority’s position remained unchanged.
TATT seems keen to emphasise that it will not “unreasonably withhold its approval,” and has offered conditions under which a more positive reconsideration might occur.
Those conditions include “an agreement for the complete divestment of CWWI’s shareholding of 49% in TSTT, in consultation with the majority shareholder NEL.”
Those agreements should include measures that mitigate “circumstances which may lead to the substantial lessening of competition or adverse effects which may reasonably be expected to result from the proposed acquisition.”
Further, CWWI and by extension, CWC, must halt any exercise of shareholder rights beyond the receipt of dividends and rights related to statutory requirements.
CWC will also be enjoined to honor a “limited right of inspection of books and records,” at TSTT, basically the same rights that anyone who receives an annual report would enjoy.
This suspension of rights, CWC must further agree, “shall [not] be deemed now or in the future, as oppressive, unfairly prejudicial or unfairly disregarding their interests or their representatives interests.”
National Enterprises Limited (NEL), which holds the majority 51 per cent shareholding in TSTT, responded positively to these constraints as it seeks to ensure that the telecoms provider remains “a viable, sustainable business.”
NEL, however, has stated rather bluntly, that “it is not in the best interest of our shareholders to seek a 100 per cent shareholding in TSTT so alternative divestment methods will be pursued.”
CWC must further divulge, in “full detail,” plans for “financial investment, source of funds, projects and expansion plans for CCTL and CNITL for the first 5 year period, detailed on an annual basis and their commitment to implementing same in good faith.”
Should CWC accept these terms, it appears to stand a good chance of winning TATT approval, but it must also agree to offload its 49 percent shareholding within a year, with an outside window of 18 months.
This puts CWC between a rock and a hard place regarding its plans for a significant market in the Caribbean.
Any potential corporate purchaser is likely to want to buy into a majority shareholding, which will require the government, via NEL, to sell at least two percent of its stock.
CWC could simply liquidate its stock for the usual token fee of US$1, but it would have to account to its shareholders for dumping an asset worth roughly US$200 million.
The company might also create an IPO and put the bundle of stock on the open market, which is also unlikely to realise the full value of the shareholding.
TATT’s concerns, are centered from the deal’s potential to bring “significant impairment of competition in the domestic communications market in Trinidad and Tobago.”
So TATT has said no, with a particularly barbed, ‘but,’ and lobbed the ball firmly back into CWC’s court for response.
Columbus has since issued a press release, thanking TATT for its “letter of approval,” and expects “a number of investors” to express interest in the 49 per cent shareholding.