Nassau sets steep demands for new cellco

20 Jan 2015

Bidders for the Bahamas’ second mobile licence are to be lumbered by a cumbersome and convoluted ownership structure in order to ensure that Bahamian ownership of the new cellco is ‘as widely distributed as possible’, Tribune242 writes, citing the government’s Request for Proposal (RFP) document. According to the RFP, the winning bidder must be at least 51% owned by Bahamians, although bidders will stand a better chance of winning if they exceed this requirement. The successful bidder will establish a new mobile company in the Bahamas, referred to as ‘Newco’ in the RFP, with a 51% stake in Newco held by Bahamians via another new entity, dubbed ‘HoldingCo’ in the document. The winning bidder will have board and management control over the operator, although Bahamian HoldingCo shareholders will have certain unspecified veto rights. The government has offered to be the initial sole shareholder in Newco to help ease the process, but ‘the government’s primary role will be to facilitate the immediate transfer of shares to Bahamian private investors at the time that HoldingCo is formed. The stipulation that the majority of the new company must be owned by Bahamians is expected to deter international investors such as local giant, Digicel which has long been the favourite to win the new concession. Instead, the terms of the RFP favour local companies such as Cable Bahamas, Limited Bahamas (formerly IP Solutions International) and newcomer Junkanoo Mobile.

It is worth noting that the current Bahamian government went to great lengths to return incumbent Bahamas Telecommunications Company (BTC) to majority Bahamian control, completing the controversial ‘2% deal’ in August 2014. The deal saw the majority shareholders in BTC, Cable and Wireless Communications (CWC) transfer 2% of the operator’s shares to a charitable trust established by the government, which owns the remaining 49% stake. However, CWC retained majority voting rights, as well as management and board control. The financial cost to the government for the transaction has not been made public, but the deal has been widely criticised as a ‘face-saving’ measure for the administration, which had criticised the previous government’s handling of BTC’s privatisation and had made promises to reclaim the company for Bahamians as part of its election campaign.

Meanwhile, the RFP places further emphasis on ensuring that the new operator is a Bahamian venture, adding that ‘applicants must commit up-skilling Bahamians to fill the chief operating officer, chief financial officer and chief executive posts in a five-year timeframe’, although applicants able to meet this requirement in a shorter timeframe would score higher. Another sticking point likely to deter international operators is a further stipulation to ‘maximise the supply of goods and services’ from the Bahamas for the network rollout, a requirement that will drive up the cost of the deployment and, given the shortage of local experts, potentially lead to problems down the road. On top of this, Nassau has set strict targets for quality of service (QoS), including achieving an average of less than 1% dropped calls each month. On the rollout front, the government has set a demanding timeframe, with the newcomer expected to provide 75% coverage of the follow islands and their main cays within six months: New Providence, Grand Bahama, Abaco, Eleuthera, Andros, Bimini and Exuma. Within twelve months coverage of these areas must reach 99% (85% for Abaco), whilst 75% coverage must also be achieved for Cat Island, Long Island, San Salvador, the Berry Islands, Inagua and Ragged Island.