Gov’t got good deal on GTT shares – Brassington

Amidst the controversy that has arisen over the disposal of government’s 20 per cent shares in the Guyana Telephone & Telegraph Company (GTT), Director of the National Industrial and Commercial Investments Limited (NICIL) Winston Brassington has told Stabroek Business that government got more than it might have otherwise expected for the sale of its shares to the Chinese technology company Datang.

In an e-mail to this newspaper, Brassington said that, in fact, the Chinese company has received what he described as “a paltry 1 per cent per annum” as a return on its investment in the local telecommunications company having already completed payment of the vast majority of the overall amount agreed on the sale.

In his e-mail Brassington concedes that the new owners of the 20 per cent stake in the company are yet to complete payment in full, but he insists that the Government of Guyana has still received a far better deal on the sale than it might otherwise have gotten.

Winston Brassington
Winston Brassington

In his communication with this newspaper Brassington asserts that in December 2010, “despite a public advertisement… almost 40 times in the local media and 30 times in the international media, and distribution of marketing information on the offer to local embassies and Guyana’s embassies abroad,” the first attempt to privatize government’s holdings in GTT held by the Privatization Unit/NICIL, resulted in a sole tender of US$7M.” The government, Brassington added, was hoping for “substantially more” and therefore did not accept the tender.

He credits “the efforts of Guyana’s then Ambassador in China, Dr David Dabydeen,” with identifying a Chinese investor as a potential buyer. “Negotiations over a period of time resulted in the Privatisation Board and Cabinet approving the sale of the shares to Hong Kong Golden Telecom Limited, a company located in Hong Kong.” A deal was reached “for a price of US$30M,” Brassington said, of which US$25M was to be paid on transfer of the shares, and the remainder after two years. In the latter half of 2012, the share sale was completed and NICIL received US$25M.

In his e-mail Brassington said, “NICIL is currently pursuing the legal route to recover the remaining US$5M.” In this regard, he said, “preparatory work for filing of a legal action in the UK is underway” and that unspecified alternative mechanisms are also under consideration.

Brassington said in his communication that “the majority of the money has been paid” and “despite the critics who claimed GTT was a cash cow, government’s timing and value for the sale, could not be better.”

According to Brassington, at the time that government was seeking to sell its shares, critics argued that the government should not have disposed of its shares as GTT was paying dividends. “But it now appears that with looming liberalization of the telecom sector which has been pending for some years now, and the fact that no dividends were paid since privatization except for a small dividend this year, the sum total of dividends received by the 20% shareholder has been just US$1M.” Brassington says that with the investment now over 3 years old this dividend represents “an annual return of about 1 percent per annum,” an amount which he describes as being “far below what would be expected from these sort of investments.”

Brassington said that comparing the public tender of US$7M with the sale price concluded with the Chinese investor of US$30M, the latter “is over 4 times the public tender.” Further, he said, that comparing returns to date, “the investor return is extremely low,” adding that competition in the sector from liberalization and new legislation is likely to further put further pressure on GTT’s cash flows and profitability.”

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