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The BTL saga

In May the following year, Intelco (International Telecommunications Limited, then known as ITL) was given permission to provide local and international telecommunication services inside the Data Pro EPZ.

BTL challenged this, alleging that Government had breached the 15-year exclusive license that it gave to BTL, which was not due to expire until the end of 2002.

The matter was compounded when the Government of Belize entered into a contract with LGS Services Limited to provide telecommunications services to GOB, which had been BTL?s biggest client.

On September 25, 2001, the Government entered a 15-year exclusive agreement with Intelco. Government claimed that it had been forced to enter into the agreement, because BTL was not fulfilling its obligations under the telecommunications law and under its 15-year license. However, to date, Government has not sought to penalize BTL for this and other alleged breaches.

During a Supreme Court trial to challenge the contracts, it was revealed that the Prime Minister, Hon. Said Musa, was brokering a deal in which the principals were trying to sell off Intelco?s forerunner, LGS, and its ?goodwill,? including the GOB contract, to BTL. LGS? assets were valued at US$18 million, and its ?goodwill? arising under the contract with GOB was US$10 million.

As the controversy over the GOB contract with LGS and Intelco brewed, BTL?s public war with the Government, and that between Sir Michael Ashcroft (BTL?s former majority owner) and Glenn Godfrey, ITL?s majority owner, intensified, as evident in the cases that had been lodged before the courts.

Publicly, the Government told Belizeans that its goal was to open the telecommunications market to competition, so that consumers could benefit from cheaper rates. However, Government had a hard time controlling what rates BTL charged.

In December 2001, despite protest marches from hundreds of Belizeans and orders from the Government for BTL to roll back the rates, BTL still proceeded with charging customers new rates?an exercise it called ?rebalancing.?

The Supreme Court, in a hearing on the matter, ruled that BTL had unilaterally changed the phone rates and had, in effect, been charging illegal rates. The Court of Appeal also ruled against BTL?s rebalancing of rates.

The Public Utilities Commission later submitted an application to the court in which it sought a clear declaration from the courts that the phone rates were illegal. It also asked the court to order BTL to refund any monies it had overcharged its customers. To date, the matter is still unresolved.

In recent years, the Supreme Court has been called to hear a number of cases that has involved BTL. The more recent legal battles had centered on BTL?s complaints about the way that the Government was introducing competition to the market.

Both BTL and Intelco were given licenses to provide the full spectrum of telecommunications services?cellular, Internet, residential, etc.?to the Belizean market. In August 2003, a third company, SpeedNet Communications Ltd., received a similar license.

BTL?s main principal up until December 2003, Sir Michael Ashcroft, publicly accused the Government of subsidizing the competition?Intelco?and refusing to ensure a level playing field. There continue to be reports that the Government has lent Intelco millions of dollars, and has additionally guaranteed in excess of $100 million in loans for the company. However, Government has denied the allegations.

The latest developments in the telecommunications market have challenged Government?s claim that its mission is to have a competitive market, so that Belizeans can benefit from cheaper rates.

Late last year, the Government entered into negotiations with American Jeffrey Prosser, to sell him the shares that Ashcroft held in BTL. In addition, the Government sold off all its interest in BTL, and furthermore gave up its ?golden share? in the company, thus surrendering its power to take control of BTL in such cases as national emergencies.

The Government began to lose control of the telecommunications company when it permitted Ashcroft to hold controlling interest in BTL, in 2001. It completely surrendered its interests in BTL this March, when it turned over 83.7% of BTL to Prosser.

Prosser had told the media in March, 2004, when he was closing the buy-out of Government?s and Carlisle Holdings Limited?s shares in BTL, that he wanted 100% ownership of the company by year-end. However, he has also been moving to control the entire telecommunications market.

On September 2, Prosser had applied to the Public Utilities Commission to have Intelco?s license transferred to Belize Telecom Limited, a company he entirely owns. However, the PUC denied the request and has instead given the Belize Telecommunications Limited, which Prosser also controls, ?a temporary permission? to operate Intelco until this December, giving the parties time to formalize the change of ownership of the company.

At the same time, Prosser plans to break up BTL, leaving about $33 million in the company?enough for the remaining 1,200 Belizean shareholders to pay themselves for the value of their shares. Prosser would then transfer BTL?s main assets (valued at close to $200 million) to Belize Telecom Limited. With BTL?s telephone system transferred to Prosser?s company, telephone subscribers would obviously have to move over to Belize Telecom, leaving BTL as a lifeless shell.

According to an October 1 notice to BTL shareholders, Belize Telecom?s parent company, Innovative Communication Corporation (ICC), a U.S. Virgin Islands company, will propose that, ??the operating assets and liabilities of BTL [the Belize Telecommunications Limited] shall be assumed by the Belize Telecom Limited under a new license to operate the system, and the Belize Telecom Ltd. shall surrender its shares in BTL and pay cash in the amount of BZ$33,649,710 (being approximately BZ$5.46 per share for shares owned by members other than the majority shareholders) to BTL.?

Prosser?s original proposal, stated only verbally, was to offer shareholders US$2.739 (or BZ$5.48) per share. At BTL?s 2004 AGM, Prosser had said, in his address to the gathering, ??ICC would remain willing to purchase all the shares by November 30th.?

However, ICC explained to BTL?s shareholders, in the October 1 letter, that there could be no guarantee that all the minority shareholders would want to sell to ICC. Also, the majority shareholders, ICC, don?t want to pay any more dividends. These were two of the arguments it gave for breaking up BTL.

But there?s a bigger plan. After BTL is killed, the agreements that SpeedNet and BTL had signed earlier this year, including an interconnection agreement, which would have enabled it to launch services this December, would be no good, and after Belize Telecom Limited concludes its planned take-over of BTL?s competitor, Intelco, Belizeans would be left with a new telephone monopoly in which they have no real stake.

There are many questions about what Belizeans have really gotten for this loss of control over telecommunications. Firstly, the Government of Belize got a US$57 million loan from the International Bank of Miami to buy out Ashcroft. The Prime Minister has said that Belize is no longer obliged to pay the loan and that responsibility is now Prosser?s.

In April, the Government of Belize had announced that it had sold roughly 84% ownership in the Belize Telecommunications Limited to Prosser?s ICC for US$89 million. However, there have been subsequent reports that have conflicted with GOB?s April 1st declaration. First, there was Government?s own admission that Prosser had not really paid for all the shares?that about $8 million was still pending for some shares.

However, a recent article appearing in the St. John Source reported on a meeting of the Virgin Islands Public Services Commission (PSC), in which the PSC ordered Prosser to stop spending stock proceeds in his purchase of a company, Vitelco, (a matter that has been the subject of a U.S. law suit), in Belize. According to the August 25th report, ICC still owed GOB US$32.5 million, payable on August 31, 2004?if true, this means that ICC had only paid the US$57 million for the Carlisle shares.

However, the PM?s declaration that Prosser had taken over the US$57 million loan instead of paying cash begs the question: What did Prosser pay? And if indeed Prosser paid nothing at all for controlling BTL, then why did the Government announce on April 1 that he had paid US$89 million for the BTL shares. Furthermore, why did GOB grant him the handsome concessions it did in the March 22 purchase agreement? And who will benefit in the end?

When Government entered negotiations with Prosser to buy-out Sir Michael Ashcroft?s Carlisle Holdings Inc., it claimed that its reason for doing so was to ensure that competition becomes a reality, bringing lower rates for consumers.

However, Prosser has made it clear that he does not support competition, and he has said on record that three phone companies are too much for Belize. He also said that competition would drive rates up in the long run.

It was not long after the BTL buy-out that Prosser?s plans to buy out Intelco also became public knowledge.

SpeedNet has yet to begin competing with BTL. In fact, some observers speculate that SpeedNet?s ability to compete would be limited, since it has arrangements with BTL that would have made it dependent on BTL for running its operations. SpeedNet plans to lease some of BTL?s infrastructure, for example.

However, its new owners have challenged the validity of the agreements, signed while the negotiations for ICC?s buy-out of BTL were still ongoing. Evidently, those agreements would be no good if Belize Telecom assumes the BTL?s operating assets.

The bottom line is that ICC and its local company, Belize Telecom, don?t stand to suffer financial loss from any of these arrangements. Notably, the contract that Prosser had signed on March 22, 2004, with the Government of Belize, whose signatory was former Minister of Finance, Hon. Ralph Fonseca, guarantees ICC a 15% return on its capital investment, even after Government gets its taxes.

Ashcroft commented, around the time of the sale, that Government had given Prosser ?an exceptional package of concessions,? and noted that Prosser had pledged $200 million in investments in the first five years.

A clause in the ICC-GOB agreement also permits ICC to transfer the agreement, including the benefits that it entails, to its ?assignee,? which would then be the Belize Telecom, and not BTL.

The end result is that, if the minority shareholders wish to keep BTL alive and rebuild the company, Prosser?s Belize Telecom would have a clear advantage over them, making it extremely difficult for them to compete, if they should so desire.

Belize Telecom would take over the main assets of BTL (including the towers, phone lines, etc.), and with these, BTL?s 32,000 landline customers, 60,000 cellular subscribers, and 10,000 Internet customers?plus all of Intelco?s subscribers!

While there has been talk that some of BTL?s 1,200 minority shareholders, who together own 16.3% of BTL, plan to take the majority shareholder, Jeffrey Prosser, to court over his planned demolition of BTL, at the time of this writing, no such legal challenge had been mounted.

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