The Committee for the Privatization of The Bahamas Telecommunications Company Limited has recommended to Prime Minister Hubert Ingraham that four interested groups be allowed to bid for a 51 percent stake in the state-owned firm.
Digicel — described as one of the most successful wireless operators in Central America and the Caribbean, with nine million subscribers and $1.7 billion in revenues — is one of the four bidders, according to information obtained by The Guardian.
Digicel is 100 percent owned by Dennis O'Brien. The committee has reportedly considered the possibility that Digicel might be interested only in acquiring a mobile license when auctioned. However, the committee reportedly believes there are strong strategic reasons for it to acquire BTC, including the fact that BTC already has 100 percent penetration and market share in mobile telephony, which provides a platform for Digicel to drive new products and synergies.
Digicel reportedly has $370 million in cash and has successfully accessed debt capital markets this year and raised over $500 million.
Another bidder is an $8 billion private equity fund managing JP Morgan's proprietary capital, The Nassau Guardian confirmed. It is partnering with one of the largest telecommunications operators in the world with more than 300 million clients and approximately $70 billion in revenues.
This consortium, which combines a strong operator with world class management and significant potential to bring many synergies and generate operational improvements, has reportedly expressed an interest in acquiring up to 70 percent of BTC now or in the future in staged transactions.
Another group includes a NASDAQ-listed company with wireless, fixed line and broadband operations in the United States and the Caribbean. It is reportedly teaming up with a Bahamian interest in making a bid for BTC.
The fourth bidder is a foreign wireless operator that does business in the Caribbean, South America and New Zealand. That operator is partnering with a $22 billion US-based global private investment company with significant experience and focus in the media, information and telecommunications sectors.
These four groups were among the six parties that submitted pre-qualification submissions to the privatization committee in August.
The Nassau Guardian understands that the committee recommended that Sun Capital Partners/CPS Partners not be admitted to the next round of the privatization process. Sun Capital is a U.S.-based global private equity firm with $9 billion of committed equity spread across a variety of industries. This firm reportedly has limited to no experience in telecommunications. CPS is a UK-based limited liability partnership formed by an experienced team of telecom managers, mostly ex-Cable & Wireless executives, but which has no continuing operations and operates on an ad hoc basis, according to information obtained.
The committee also advised that Allied International Investment Limited not be considered, The Nassau Guardian understands. Allied operates a handset distribution and repair business in sub-Saharan Africa.
Based on the information The Guardian understands that the firm provided the committee, it (the committee) is reportedly concerned that the operational expertise of Allied is in the handset distribution business and not in wireline/wireless operations.
Several major telecoms companies reportedly described as among the "best prospects" to purchase a 51 percent stake in BTC have decided not to participate in the sale process, The Nassau Guardian can also confirm.
After considering the initial information provided to it, AT&T reportedly noted that it is busy looking at domestic wireless acquisitions and has a low appetite for incumbent/fixed line acquisitions.
AT&T would have some strategic rationale for a partnership in BTC due to the large volume of tourist traffic to The Bahamas, however this acquisition would be very small for them, and clearly has not attracted sufficient internal interest.
After a lengthy review of the opportunity, Cable & Wireless decided not to participate, being focused on other organic growth opportunities and financial market conditions.
Verizon reportedly indicated that it was busy looking at domestic wireless acquisitions, and has a low appetite for incumbent acquisitions.
America Movil reportedly decided that the small size of the market did not justify the effort of entering into an English speaking country.
And Rogers reportedly showed some interest initially but decided not to participate. The firm reportedly has been going through a management restructuring exercise and was not able to focus on this transaction. The strategic rationale for it to bid for BTC was also reportedly unclear as the firm is very focused on the Canadian market and little elsewhere including the Caribbean.
The privatization committee said in a statement last week that a "select group of potential buyers" have been invited to participate in the due diligence phase of the privatization process.
The due diligence phase will provide potential buyers with the opportunity to review business, financial and legal information, as well as meet with key executives prior to submitting an economic bid. The committee said due diligence will be conducted over the next several weeks and the deadline for bids is currently expected by the end of November.
Ingraham has said the government intends to use proceeds from the sale of BTC to pay down debt. He revealed recently that government debt to GDP could hit 50 percent before the current economic crisis ends.