Elias: $700M too much for CWC

While CWC must sell its TSTT stake in order prevent a conflict of interest in CWC buying TSTT’s rival telecom firm Flow, Elias said CWC’s inability to get a buyer after 18 months of offering the shares for sale meant the asking-price was too high. He said the price of CWC’s shares is affected by the fact that anyone buying a minority stake in TSTT will be subjected to the majority shareholder National Enterprises Limited (NEL). “That affects the price,” he reasoned. He suggested, “Maybe patriotic citizens could buy it as an investment.” Elias scoffed at a conspiracy theory that Massy would use its $255 million to try to buy the CWC’s stake, saying Massy wants to leave the telecom sector and return to its core business. He nonetheless quipped, “$255 million would be a steal.” Elias used the opportunity to urge listeners to “come home” to TSTT, saying that an anticipated award of a 750 mega hertz licence to TSTT would boost the mobility, speed and geographical accessibility of their services.

“I hope the people saying they have a stake are also our customers and are not running to the competition.

I hope they come home.” Elias defended the company’s $255 million purchase of Massy Communication’s amid TSTT’s planned expenditure of $3.8 billion but was unable to state the company’s debt.

He justified buying Massy Communications by saying that such acquisitions are for TSTT’s growth.

He said TSTT’s Management’s Five Year Strategic Plan was accepted by the board, Cabinet and the bank(s) that had loaned the company $1.9 billion. Elias justified TSTT’s non-disclosure to Cabinet of the Massy deal beforehand by saying that any such disclosure to a single shareholder would be a violation of the Securities Act that could have seen him jailed for seven years and fined $5 million. TSTT was also bound by a non-disclosure agreement signed with Massy.

Further, asked about a duty to notify Cabinet under the State Companies Operations Manual, Elias said TSTT is not a State enterprise, but a company governed by the Companies Act and Securities Act. Asked if Finance Minister Colm Imbert’s nod was needed for the Massy deal, Elias said if such had happened this would have brought allegations of political interference.

Asked about Opposition claims that the Massy deal was $30 million above a $225 million ceiling approved by the board, Elias said , “Management’s judgement was that the business was worth a lot more than $225 million. We think we got an excellent deal.” He said the purchase had included some US$20 million (about $130 million) in fibre- optics laid down by Massy in some areas. Further this acquisition saved TSTT having to find US$20 million in foreign exchange to buy its own fibre optics for installation, in addition to him previously saying it speeded up TSTT’s rollout process.

Further TSTT gains thousands of existing Massy clients. He said the board and management think the Massy buy was “a fantastic deal”.

Elias said TSTT last year had a $300 million net loss, comprised of a combination of a $200 million profit and a $500 million write down of old equipment. “This year will be a profit,” he vowed.

He described TSTT’s debt as healthy, at a debt-servicing obligation of 2.5 percent times its cashflow (known as EBITDA) compared to a telecom rival’s ratio of five times their EDBTDA.

Replying to a phone-in query by activist Harvey Borris, Elias said TSTT has proper documents to show the Massy purchase was a good deal. “Accountability will be provided. We’ll account with auditted accounts, one per year. People will feel good once they understand it.”