Last week, I reported in this space on my search for the head office of Cable & Wireless Communications (CWC), the company that is listed on the United Kingdom's FTSE and is a major player in the Caribbean's telecommunications sector. That search took me to 26 Red Lion Square, which is two minutes walk from the Holborn underground station in London, on a cold, wet and windy day and led to the discovery that the company that has dominated regional telecoms for more than a century occupies the third floor of a rather nondescript building. The space occupied by CWC is organised on an open-floor concept-resembling what one imagines to be a mid-level call centre in Dehli-in which even the company's top executives have cubicles rather than offices. Small, private meetings at the CWC head office take place in meeting rooms rather than offices. The overall impression that a visitor to the CWC headquarters gains is of a company that is rather down on its luck, not of a company whose footprint once spanned the globe. (The official explanation, as was suspected, is that the headquarters staff is small because the main action is in the operational centres, many of which are in the Caribbean.)
CWC is currently headed by telecom executive Tony Rice, who said in an interview-published in the Financial Times on March 25, 2010 just before its demerger with Cable & Wireless Worldwide-that CWC would "consider asset sales as well as acquisitions as it looked to maximise cash generation and shareholder returns." Rice said that CWC would "look at selling its minority stakes in overseas telecoms companies" such as TSTT, in which CWC holds a 49 per cent minority stake, "if there was no obvious path to control," according to the Financial Times report of the interview. By "obvious path to control," CWC means that it would like to have a majority stake in companies such as TSTT so that it can have management and operational control of companies in which it has large investments. So, it seems to me that for CWC being a 49 per cent minority shareholder in a company in which a government-controlled entity has the 51 per cent majority stake is not an optimum place to be as it leaves them in a position of almost being a passive investor in such companies. The clear message from my visit to London, then, is that CWC would be prepared to sell its stake in TSTT if there were "no obvious path to control" of the local telecommunications giant. The reason that CWC has exercised the patience of Job in its dealings with the T&T government on the matter of control over TSTT is that there is great concern about upsetting the applecart and also the fact that T&T is the strongest economy in the region that CWC considers to be its centre of gravity.
The question, therefore, is would the Government of T&T-led by Prime Minister Kamla Persad-Bissessar and in which Winston Dookeran is the Minister of Finance-be prepared to grant CWC an "obvious path to control" of TSTT? While it seems to me that in sweet T&T all things are possible-this is a country, after all, in which the most unimaginable things have happened such as the appointment of one Reshmi to head the local equivalent of the CIA-the sale of the State's 51 per cent stake in TSTT to CWC (or even the sale of the two per cent of TSTT that would give CWC control) would be strongly opposed on ideological, financial and national interest grounds. The giving up of control of TSTT by the People's Partnership administration would meet strong opposition from the union representing TSTT workers, members of the labour movement, left-leaning academics and even members of the People's Partnership cabinet, such as Minister of Labour Errol McLeod, who is the retired leader of the country's oil workers trade union. It would also be strongly opposed by those who believe that telecoms in the 21st century is a highly strategic industry which, if properly managed, can lead to the creation of thousands of jobs and billions in new tax revenue. It may also find opposition from those who are responsible for the country's national security who may be uncomfortable with the prospect of two foreign companies (the other being Digicel, of course) controlling T&T's capacity to monitor mobile and e-mail communications. But what if the Government were to give up control of TSTT, while gaining control of CWC?
As of yesterday morning, CWC's market capitalisation was £761 million, which means that a 51 per cent controlling stake in the company can be acquired for £381 million ($4 billion) and a 29 per cent stake-which I understand is the threshold beyond which companies have to make an official takeover bid-can be had for £228 million ($2.4 billion). According to the 2011 annual report of National Enterprises Ltd, the company that holds the State's 51 per cent stake in TSTT, the Minister of Finance as Corporation Sole owns 396.3 million NEL shares, comprising 66 per cent of the company. Those shares were worth $5.8 billion as of Tuesday's trading. If Corporation Sole were to sell 300 million NEL shares to local institutional and individual investors-who are starved of high-quality equities-it could raise $4.4 billion, which would easily allow for the acquisition of a majority stake in CWC and would leave the Corporation Sole with 96.3 million NEL shares, which is equal to about 16 per cent of the investment holding company. NGC owns 100 million NEL shares.
Owning 51 per cent of CWC would give T&T control over a major, telecommunications company, which is listed on a major stock exchange and remains a dominant force in the industry throughout the region. Also, and this is something that I discovered as a result of a bitter experience in London last week, shareholders in UK-listed companies, who acquire their shares through a nominee account held by a stockbroker, can acquire up to three per cent of the issued share capital of a UK company without that fact being disclosed to the UK company. As I put it to BP's company secretary in an e-mail on Tuesday, the fact that someone can acquire up to three per cent of BP without their name turning up on the company's share register, places all UK-listed companies at risk of takeover-by-stealth because such companies have no knowledge of the beneficial owners of nominee accounts until they cross the three per cent threshold.
• I wonder what Mr Dookeran thinks about the prospect of giving up control of TSTT and taking control of CWC and therefore being able to call the shots for the telecom sector throughout the region?
• Are we in T&T going to be content forever to keep on controlling local companies or are we going to start thinking like the Chinese, the Japanese, the Saudis and the Russians and start to raise our gaze to take control of companies listed on foreign exchanges, which have an interest in our economies?
• Does such thinking require a paradigm shift that the current administration may not be capable of as it seems to spend a great deal of its time putting out local fires, while there are people in the outside world who want to control some of our prized assets?
• As was argued in this space maybe five years ago, one of the main problems with the arrangement of the Caribbean economies around plantations was the fact that regional people never owned those plantations.