Will C&W get full control of TSTT?
Cable & Wireless Communications (CWC) wants full control of the, Telecommunications Services of Trinidad and Tobago (TSTT). This post discusses this development and some of its possible implications.
An article published over the weekend in The Trinidad Guardian Newspaper in Trinidad and Tobago, reported that Cable & Wireless Communications (CWC), the parent company of LIME and other operations across the globe, clearly expressed a desire to “take full control” of the incumbent telecoms company, Telecommunications Services of Trinidad and Tobago (TSTT). In discussion held last week with investment analysts, CWC’s Chief Financial Officer, Tim Pennington stated this position:
Our preferred objective is to move to full control, which is what we have done in other markets such as the Maldives, but if we can’t do this we will exit it. We’d like to resolve the situation one way or another soon…
Currently, ownership of TSTT is a joint venture between CWC, the minority shareholder with 49%, and the Government of Trinidad and Tobago (GovTT), with 51%. This arrangement was established though the merger of the Trinidad and Tobago Telephone Company Limited) and Trinidad and Tobago External Telecommunications Company Limited in 1991, which created TSTT.
Although Trinidad and Tobago has introduced competition and regulation into its telecoms sector, the continuation of that joint venture arrangement, particularly the GovTT’s stake in TSTT, is generally considered a bit of an anomaly. The preferred practice is for governments to divest themselves of shares they might have had in incumbent telecoms companies, when the sector has been liberalised, to create a more level playing field.
Having said this, it appears that over the last several months there has been friction between CWC and GovTT. In March this year, the former threatened legal action against the latter “and its appointed directors for any possible breaches in governance” (Source: Trinidad Express Newspapers). The same article also indicated that there had been disagreement regarding how TSTT should be positioned, particularly its capital expenditure budget.
Issues and questions raised
Although it is still early days, CWC’s intention with regard to TSTT does raise some interesting questions. A few are highlighted and initial thoughts are shared below.
Why does CWC want “full control” of TSTT?
Although it is automatically being presumed that CWC wants to buy out the GovTT’s 49% stake in TSTT, that position (so far) has not been explicitly stated by the company. They may be prepared to be satisfied with a controlling interest (e.g. 51%) and management control of the company.
However, in the recent conflicts between the GovTT and CWC on the operation of TSTT, it was also stated that that “C&W directors want to increase liquidity in the company by selling certain assets, but local directors are in disagreement with this approach” (Source: Trinidad Express Newspapers). When that position is considered in the context of challenges other CWC subsidiaries have been experiencing in other markets, such as Jamaica, the company might be keen to maximize efficiency and profitability in every jurisdiction in which it has a stake. However, the current TSTT board, which comprises both GovTT and CWC representatives, is not fully in agreement with that position.
Does GovTT want to sell its stake in TSTT?
As at the writing of this article, there does not appear to be any firm indication that GovTT is prepared to sell part of or its entire stake in TSTT. The unions and public appear to be of the position that TSTT should remain owned and firmly in the control of the Government and people of Trinidad and Tobago, and may even encourage the GovTT to absorb all outstanding shares, or make them available on the local stock exchange.
What might be the implications to the sector?
Should the GovTT decide to divest itself of its stake in TSTT, it could increase investor confidence in Trinidad and Tobago’s telecoms sector. As indicated above, it considered best practice for governments to not be both a player (e.g. a telco) in the sector as well as the regulator of the sector, as this often leads to concerns about transparency and impartiality. Additionally, if TSTT were under CWC’s full control, it would be in a position to become even more aggressive in the market. However, TSTT would also be able to streamline itself and its operations – most likely in a manner than might be politically unpalatable, but consistent with commercial practices in that sector.
On the other hand, should CWC decide to ends its association with TSTT, the GovTT might be under considerable pressure to acquire CWC’s stake, and have TSTT as 100% state-owned. However, this scenario might make current investors nervous for the reasons outlined above.
Is the situation in the Bahamas influencing CWC’s position in Trinidad and Tobago?
It is possible that CWC’s current dispute with the Government of the Bahamas (which wants to regain controlling interest in the Bahamas Telecommunications Company, which it sold about two years ago) might be strengthening its resolve with regard to TSTT. However, there also appears to be a wider strategy by CWC to either secure full control of telecoms companies in which it has a stake, or exit those relationships, should it not possible to achieve this.
Do you agree with the views shared above?
Should CWC gain full control of TSTT?
Should the GovTT acquire CWC’s stake in TSTT?
Looking forward to your feedback in the Comments section below.