The views expressed in this article are those of the author and not necessarily those of Breaking Belize News.
By Adam Flowers: From the very beginning in 1988, when the Esquivel-UDP first opened BTL to public shareholding, perennial Belizean boogeyman Lord Michael Ashcroft slowly sank his fangs into the company; and now nearly 40 years, several administrations, half a billion dollars and countless controversies later including this latest; he is taking one last bite of the BTL pie and having the last laugh.
After tooth and nail, BTL was finally nationalized in 2009; at an enormous gross nationalization-related outlay to Belize of roughly $564 Million. And even that figure does not necessarily represent the complete bill. Once years of accumulated interest, legal and arbitration expenses, tax concessions and other costs arising from the wider BTL saga are considered, contemporary estimates placed the overall cost closer to $700 Million. Opposition parliamentarians were already warning by 2017 that the final figure could approach $700 Million, though no single audited Government accounting has established $700 Million as an exact final nationalization cost. More than half the big B. The cost associated with liberation from Ashcroft’s near-total control of Belize’s telecommunications sector; only now to once again intertwine itself with Ashcroft-linked interests through the Speednet acquisition through 2030 for almost another $100 Million.
And are we surprised that the maturity of the amortization schedule coincides with the year in which the next general election cycle would culminate in 2030, if the current term runs its full course? It is an $80 Million acquisition with total scheduled payments of $91.46 Million, and for the Briceño shareholders, this represents an estimated total $20.59 Million based on amortization and interest terms for their 22.51% stake in Speednet, if the seller notes and interest are allocated proportionately to their shareholding.
Essentially, once principal amortization begins; BTL will need to pay Speednet shareholders about $5.5 Million every 3 months or almost $22 Million a year with a total interest of $11.46 Million. And the success of the deal hinges on many IFs: Like IF Smart is even worth $80 Million; IF Speednet’s annual free cash flow will meet the $22 million amortization requirement; or IF BTL will need to cover any shortfall; and IF BTL’s projections of cost savings and “synergies” will materialize.
Usually, if a deal seems too good to be true, it normally is. Speednet shareholders assert the company is viable for the foreseeable future but have agreed to unexpectedly favorable terms to BTL; to finance the $80 Million at 4.5% interest with the first year as interest only followed by 16 quarterly principal-and-interest amortization payments.
And as BTL completes the merger; certain jobs could become redundant, integration costs will increase; and in a one-company national mobile market regulated by a Public Utilities Commission (PUC) of Government appointees, who can guarantee that consumers will not eventually face higher service costs to meet payment demands?
It could be Lord Ashcroft’s parting gift to BTL for all the memories. BTL was incorporated in 1987 and by 1988, Ashcroft-alliance company Carlisle Holdings had already bought around 9% of shares. By 1992, Carlisle bought another 15% giving a 24% stake and in 1993, the outgoing George Price Administration gave Ashcroft/Carlisle “permitted person” status, effectively allowing Ashcroft to hold more than 25% of the company, despite the 25% cap that otherwise applied to ordinary private shareholders under the company’s original Articles of Association.
When the Manuel Esquivel UDP came to office later in 1993, it refused to honor the exemption and up to 1998, Ashcroft was blocked from exercising his permitted person status even though he continued buying shares, though they could not be registered against the 25% ownership cap. By the time the PUP under Said Musa came back to power, the stage was set. In 2001, Carlisle Holdings bought MCI’s roughly 25% block, bringing its total shareholding to 48.4%. Carlisle then bought about another 3% from other BTL shareholders, bringing its total to roughly 52%. The Musa administration allowed Carlisle to register all its shareholdings giving it majority control of BTL. Government even appointed Ashcroft Chairman of the Board.
The Telecommunications Act of 2002 provided for competition and new licenses and in 2002 Speednet is incorporated. By late 2003, Ashcroft agrees to sell his majority stake in BTL. Enter Jefferey Prosser. In 2004, Government buys Carlisle’s shares for US$57 Million, combines them with other shares and sells roughly 84% of BTL in a transaction worth approximately US$89.7 Million. However, by 2005, Prosser defaults on a US$57 Million payment and GOB takes back control of majority shares.
By the time Government finished disposing those shares, Ashcroft’s companies once again re-emerged as the controlling interest of BTL. By March 2005, SMART goes live. And as history records, in September 2005, Prime Minister Said Musa signs the infamous, secret Accommodation Agreement; guaranteeing BTL a minimum 15% annual rate of return, favorable tax treatment and import-duty concessions, restricted the granting of telecommunications licenses to any new competitors other than SMART and limited government interference. The Agreement did not merely give BTL favorable tax treatment. It also created a mechanism through which shortfalls under the guaranteed 15% rate of return could ultimately be set off against taxes otherwise payable to Government, including business tax, while also providing specific tax exemptions. By 2008, millions of dollars in taxes had already been offset under the arrangements. Years later, Barrow’s own Government placed an extraordinary value on getting rid of the Agreement: in 2016 Barrow put the savings attributable to its elimination at around $202 Million, and later described almost a quarter-billion dollars of the BTL award as being attributable to the Accommodation Agreement itself. Of incredible note, during this period of time, the Leader of the Opposition also acted as attorney for Ashcroft’s ECom in BTL litigation during the months leading to the signing of the Accommodation Agreement.
Between 2006-2007, the assets, rights, obligations and liabilities of Belize Telecommunications Limited were transferred to its successor, Belize Telemedia Limited and then the Dean Barrow administration comes to power in a red wave, owed significantly to public fallout over some of the very BTL deals made by the former PUP administrations. Barrow rejects the Accommodation Agreement and in August 2009 moves to nationalize BTL. But there is an extraordinary footnote to that morning. On August 24, 2009, the very day Barrow took the acquisition legislation to the House, lawyers acting for Telemedia and the Ashcroft interests formally communicated that they would accept Government’s repudiation of the Accommodation Agreement and treat it as terminated — effectively arguing that Government could get rid of the infamous Agreement without taking away the company. Barrow proceeded with the acquisition anyway, maintaining that Belize’s problems with Ashcroft’s control of Telemedia went far beyond the Accommodation Agreement. Government acquired approximately 94% of Telemedia’s shares and related interests. By around this same time, three Ashcroft-linked companies — Heaver Holdings, Callerbar and Riddermark Ventures — held around 77.38% of Speednet.
In 2011, the Court of Appeal strikes down the Government’s takeover of BTL. Within weeks, Barrow’s UDP passed new acquisition legislation and subsequently enshrined Belizean majority ownership and control of BTL in the Eighth Amendment to the Belize Constitution. The next few years are filled with legal battles and arbitration in which firms associated with members of the Barrow family act as counsel for the Government of Belize, with substantial legal fees being paid along the way; but ultimately Belize forked over roughly $564 Million in nationalization-related compensation and settlement payments tied to the Ashcroft alliance.
Now, to rid BTL of the Ashcroft-linked majority ownership in Speednet for good, BTL could pay another near $100 Million if the deal closes on the disclosed terms. It is a feather in the cap of Belize’s pied piper. And shockingly, despite opposition from the unions, civil society and the Chamber of Commerce, the wider public response to the new Speednet acquisition has been remarkably muted. It is as if we are resigned or sensitized to the Ashcroft feeding frenzy. Are we simply too cynical, or disinterested to care? Perhaps the lack of response to this issue is because the current voting generation, were in school during the early 2000s and only vaguely heard of the BTL-saga but never knew the intricacies, or because the upcoming generation have never heard of the boogeyman Lord Michael Ashcroft. But the time to have taken a stand against the Speednet acquisition may already have passed. The BTL board has already voted to proceed, though the PUC review and final transaction documents remain outstanding, and approval seems imminent at this point. If the deal closes on the disclosed terms, this money must be paid by the end of 2030.
But thank the good Lord for the laughs and the memories! But is it he who indeed has the last laugh?
There is, however, another uncomfortable reality that deserves consideration: Belize may simply be too small a market to sustainably support two completely duplicated national telecommunications networks indefinitely. Competition sounds good in theory and has undoubtedly benefited consumers, but if two companies continuously cannibalize an already tiny market until neither generates enough profit to properly invest in infrastructure, the consequences are different when one of those companies is BTL. If SMART crumbles, its private shareholders lose. If BTL crumbles, Government loses, Social Security loses and ultimately the Belizean public loses. From the narrow financial perspective of BTL and the Social Security Board, therefore, acquiring SMART and eliminating duplicated operating costs may actually make business sense. The larger national question is what Belize replaces that competition with. If BTL becomes the single domestic national mobile operator, then Belize must ensure genuine outside competition remains possible — whether through Starlink, other international providers or future entrants — while the PUC must enforce prices, service standards, consumer protections, privacy and open access. The real danger may therefore not be the merger itself, but allowing a Government-controlled monopoly to emerge without strong enough competition and regulatory safeguards around it.
The post BTL – From Beginning to End: Ashcroft Gets The Last Laugh? appeared first on Belize News and Opinion on www.breakingbelizenews.com.
The views expressed in this article are those of the author and not necessarily those of Breaking Belize News. By Adam Flowers: From the very beginning in 1988, when the Esquivel-UDP first opened BTL to public shareholding, perennial Belizean boogeyman Lord Michael Ashcroft slowly sank his fangs into the company; and now nearly 40 years,
The post BTL – From Beginning to End: Ashcroft Gets The Last Laugh? appeared first on Belize News and Opinion on www.breakingbelizenews.com.