Hurdle for CWC deal

(Trinidad Guardian) T&T’s telecommunications regulator on Thursday expressed deep concerns about the possible impact Cable & Wireless Communications’ proposed US$3 billion acquisition of Columbus International would have on the competitive environment for the telecom industry in T&T. But the Telecommunications Authority of T&T (TATT) said it “shall not unreasonably withhold its approval” of the transaction if CWC were to suspend its shareholder rights with regard to its 49 per cent stake in majority state-owned TSTT, among other conditions.

In its first substantive statement on the proposed mega telecom merger, which was announced last November, TATT made it clear that an “in-depth economic and legal analysis” of the implications of the transaction on the local telecom market “found that substantial lessening of competition or adverse effects may reasonably be expected to result from the proposed acquisition of Columbus by CWC.”

As such, the authority said it did not approve the application for the change of control of Columbus’ local operations, which trade as FLOW, at its board meeting on February 9. Following that board meeting, CWC and Columbus requested that TATT reconsider its rejection of the change of control application.

TATT is required to approve the change of control of Columbus that would result from its acquisition by CWC. That approval is one of the conditions precedent of the transaction being concluded. TATT said at a board meeting on Wednesday,  it “resolved that should the 49 per cent shareholding by CWC in TSTT remain unchanged, then pursuant to section 22(1) (c) of the Act, the application for change of control is not approved.”

The authority said it would not withhold its approval provided the following actions are taken:

(1) That the applicants submit an agreement for the complete divestment of CWC’s shareholding of 49 per cent in TSTT, in consultation with the majority shareholder National Enterprises Ltd (NEL) in accordance with the shareholders’agreement and to be approved in writing by the Authority, such approval to not be unreasonably withheld;

(2) Within the agreement to be made with NEL, as an undertaking on the part of the applicants  to ensure the mitigation of circumstances which may lead to the substantial lessening of competition or adverse effects—

(a) there shall be an immediate stay to the exercise of shareholder rights in general by CWC and under the shareholders’ agreement including the right to appoint directors, save and except the right to dividends and certain limited rights for statutory requirements. Such amendments must form an amendment to the TSTT shareholders’ agreement to be submitted to the Authority and further, that:

(b) The Authority requires CWC to have a limited right of inspection of books and records, sufficient only to allow a substantiation of dividends owed and to make statutory filings and declarations;

  • CWC and CWWI to provide their written undertaking that no part of the actions agreed to be undertaken in this process for approval for change of control for the so-called “suspension of rights” shall be deemed now or in the future, as oppressive, unfairly prejudicial or unfairly disregarding their interests or their representatives interests (further to the meaning of oppression under section 242 of the Companies Act)….

(c) The Applicants and CWC must provide to the Authority in writing the full details of financial investment, source of funds, projects and expansion plans for the merged entity for the first five year period…to the satisfaction of and approval by the Authority prior to issuing an approval of the change of control;

(3) The requirements set out in (i) and (ii) above are to be submitted by the Applicants and CWC to the satisfaction of the Authority prior to its issuing an approval for change of control; and

(4) The complete divestment of CWC’s shareholding of 49 per cent in TSTT must be completed within one year of the date of communication of this reconsidered decision.

 

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