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Financial News

Aug 2016 Financial News

CWC stake in TSTT up for sale

Aug 25, 2016

The two top officials at TSTT— the 51-per cent State-owned telecommunications provider— are calling on the regulators to insist that the 49 per cent minority shareholder, Cable & Wireless Communications, sell its 49 per cent stake in the local company.

TSTT chairman Emile Elias and the company’s chief executive Ronald Walcott made the point during a joint interview on Thursday last, at TSTT head office, downtown Portof-Spain.

Elias said the long-awaited valuations of Cable & Wireless’ 49 per cent stake in TSTT had been submitted and, as the valuation were a prerequisite for the sale of the stake, he wants the process to be completed by year end.

He said: “We at TSTT want a strategic partner with whom we can go into the future and that partner, if it is the right company, will bring that added value to us.”

Elias said the Government “needs to find a formula that would remove TSTT from the negative aspects of the five-year political cycle.”

TSTT is currently negotiating with local financial institutions to arrange $1.9 billion in financing for the company’s five-year strategic plan, which envisages a total of $3.8 billion in capital expenditure. The telecommunications provider expects to generate $1.9 billion internally to contribute to the capital expenditure.

The $1.9 billion in long-term financing will take out $1.1 billion in short-term debt that TSTT took on in order to partially fund its strategic plan and replenish its cash reserves, which were depleted by the payment of $800 million in backpay for two, three-year collective agreement terms. The fact that the company is looking to raise $1.9 billion in long-term debt does not preclude the possibility of vendor financing, the officials said, but that would be a function of the conditionalities, the rate of interest and other terms and conditions of such financing.

The company is looking to raise an amortising TT-dollar bond of at least ten years with the interest rate bearing some relationship to the 4.5 per cent that the Government was able to borrow at on the local and international capital markets.

Elias said: “We think TSTT’s balance sheet and its impeccable track record in meeting all of its financial obligations would suggest that the premium over government debt should be minimal.”

Walcott pointed out that TSTT has never received an equity injection from its two shareholders in its 26 years of existence. It has not ever needed a government guarantee for its debt and it has paid out $2.7 billion in dividends since inception.

It is envisaged that the bond will be issued before the end of 2016.

Elias said: “A critical part of our five-year plan is to get the spectrum to be able to break out high-speed mobile data, the 4G licence. We have decided to take a vigorous approach with TATT (the Telecommunications Authority of T&T) to ensure that TSTT gets the spectrum we require in the shortest possible time.”

TSTT will take all measures necessary to ensure the company receives the requested spectrum for high-speed mobile data, said Elias.

They also said that while TATT can grant spectrum, it does not have the power to grant a third mobile concession, as that is under the purview of the Cabinet.

Referring to the request for proposals (RFP) for the 4G licence that TATT issued three years ago, Elias said TSTT produced a detailed bid that met all of the requirements of the RFP.

“Sitting in the room as a partner during the preparation of the bid was Cable & Wireless, which was part of the application by TSTT,” said Elias, adding:

“Cable & Wireless, on its own, prepared and submitted an application for a third mobile licence” and then in November 2014 announced that it was acquiring Flow, which had itself submitted an application. He reiterated his call for the RFP to be scrapped because of the material changes that took place in the two other applicants for a 4G licence.

They argued that while it is technically possible for TATT to issue three 4G licences, that would entail an entire redesign of the spectrum plan. The TSTT officials also argued that to introduce a third mobile operator in T&T— with the two existing operators: TSTT and Digicel—would lead to a decline in service levels, a reduction in the introduction of new technology and would be a drain on the country’s foreign exchange resources.

Elias said: “We already have one-and-ahalf cellphones for every man, woman, child and newborn baby in this country. There is no logic to spending valuable foreign exchange that a third mobile provider would demand. We ourselves need US dollar as we build out the future. Why are we duplicating that again and again.”

Walcott added: “It becomes a waste of resources.”

The TSTT chairman disclosed that the company has engaged Erickson, the global telecommunications provider, to introduce a convergence programme to the company that will allow customers to amend, expand or change their packages “at the touch of a fingertip.”

The convergence project will transform TSTT into an agile, broadband communications company, said Elias, with Walcott pointing out that the enterprise programme will allow TSTT to have a 360 degree view of all of its customers and be in a position to provide them with any service customers require within 48 hours.

The cost of the convergence project will be $300 million and phase one will be rolled out in September, phase two by January next year and phase three by July 2017.

Elias said: “At this point, we have siloed operations: one for residential, one for mobile, one for enterprise and a different one for service delivery. We are collapsing all of the silos, which would mean there would only be TSTT customers and we would be able to build a solution that best suits the individual’s need or accommodate the individual’s desires.”

The company’s revenues in the last five years have been essentially flat at about $3 billion a year, “in the face of the most intense competition in the local telecommunications market,” added Elias.

He said TSTT has been able to maintain in excess of 50 per cent of the mobile market and the company has been “aggressively taking steps to increase market share in the mobile side,” where the company sees the future.

Following a global trend, the TSTT officials said in T&T more and more people are using their mobile telephones to substitute for landline (home) devices.

While TSTT maintains a 93 per cent market share of the local landline business, according to Elias: “There is some drift downwards by people who would normally use their landlines. They keep the landline, but they don’t use it for the number of minutes they used to in the past.”

In terms of television, Walcott acknowledged that Flow dominates the local market, with TSTT looking to increase its ten per cent position and growing.

“Our market share will continue to grow exponentially as we roll out our fibre solution,” said Walcott.

Elias added that TSTT has a three-phase fibre solution that the company expects will connect 80,000 homes in the first instance and 200,000 homes within five years as part of the company’s revised, five-year strategic plan.

As the company places fibre in new areas, the plan is to market the company’s broadband television and Internet offerings to residents in bundles. The company plans to convert all of its copper customers to fibre.

In relation to the recent decision by Flow to increase the price of their residential television packages by a maximum of 6.3 per cent, Elias claimed that TSTT currently has the most competitive television rates in the country. —Anthony Wilson


Business Guardian, BG4
Thursday August 25, 2016