Never mind all the talk about staying in the Caribbean… Cable & Wireless Seeks Greener Pastures For Greater Profits! - Februa...

By Earl Bousquet

Prime Minister Dr Kenny Anthony has reiterated that the Government of St. Lucia is standing firm in its resolve to open up the local telecoms market to competition. And the six member-states of the Organisation of East Caribbean States (OECS) are standing four-square behind St. Lucia in its implementation of their agreed collective approach to deregulation of the telecommunications sector in the sub-region. The OECS and Caricom leaders have also called on Cable & Wireless to withdraw its threat to leave St. Lucia and return to the negotiating table, saying in no uncertain terms that if it pulls out of St. Lucia, it would also have to leave the other islands where it operates.

The position adopted by the OECS Prime Ministers of the five countries of the sub-region where the company operates followed a week of high-powered sabre-rattling by Cable & Wireless as its license deadlines approach in all the islands, but particularly in St. Lucia where they expire on March 31, 2001

Snags had reportedly botched the last round of talks between the company and the governments on January 31 and another was set for St. Kitts & Nevis today (February 21, 2001). In the interim, the company publicly stated it intended to pull out of St. Lucia at the end of its license on March 31. The company had allegedly already begun quietly loading stuff for shipping out of the country. It was also reported the company – in one sudden transaction -- had withdrawn close to $30 million from its major local bank account, which was sent overseas.

At the same time, the company embarked on a major propaganda and public relations offensive to explain it position. It mobilised its local workers and sought to enlist them in what was essentially sold by the managers as a battle between them and their government.

At the end of it all, people were understandably concerned about several issues, including possible disruption of service, job security for the workers and whether the other islands would stand with St. Lucia if Cable & Wireless pulled out.

The Prime Minister’s address last Sunday night offered answers to the genuine concerns of the workers and the company’s customers. But it also made it quite clear the government would not back down in the face of the company’s use of scare tactics to turn its St. Lucian workers against the very government that had already legally and legislatively secured their interests in case the company pulled out.

The company’s threat to leave, however, is no simple threat. It’s quite real. Every indication is that Cable & Wireless will soon terminate its 129-year presence in the Caribbean.

According to a report in the January 27, 2001 issue of the Investors Chronicle – published by the influential Financial Times Stock Exchange (FTSE) for the information and guidance of the world’s biggest investors and stock market -- the company had long ago taken a business decision to transform itself “from a telecommunications conglomerate to a specialist provider of voice, data and internet services to businesses.”

In pursuit of this definite and deliberate business decision, Cable & Wireless’ principal decision-makers – led by CEO Graham Wallace -- embarked on a major transformation exercise, allocating the fantastic sum of 4.2 billion pounds -- in dry cash -- to spend on the next stage of it expansion into Internet-based services.

As part of this transformation process, the company, under Mr Graham’s leadership, has been systematically disposing of its assets in several areas around the world where it had maintained a great presence for decades. It has already done away with its British Cable-TV assets and last year it also sold  its majority shares in Hong Kong Telecoms. Now it’s selling its majority shares in Optus Australia, the second largest telecommunications company on that continent, from which sale Cable & Wireless expects to earn another 5-6 billion pounds (sterling). That transaction, by itself, will put the amount of dry cash available to the company at some 11-12 billion pounds (sterling).

  Another recent article, this time in the Financial Times of January 23, 2001 confirmed reports on the British stock market that the company was continuing to dispose of its unwanted assets by selling major shares around the world. It has this year already sold 8 million of the 44.4 million NTL shares it inherited after a recent merger between NTL and its consumer division last May. Cable & Wireless earned 183 million pounds (sterling) from that sale and announced it would ultimately also sell its residual holding (of 36.4 million NTL shares), now worth another 865 million pounds (sterling).

Cable & Wireless head Office has long ago decided to dispose of its Caribbean assets as part of its worldwide restructuring. Back in April 1998, Financial Times  also reported Cable & Wireless was involved in a partnership deal with Telecom Italia that would yield a significant cash injection. Under that deal, the British company has since sold 20% of its stake in a French company called Bouygues Telecom to the Italian company at price tag of US$743 million. It said at the time it would also sell 20% of its Caribbean shares and 5% of its North American shares to the Italian company, but it’s not known yet what happened. In return, Telecoms Italia agreed integrate 29% of its investments in Etecsa (the Cuban telecoms company) into Cable & Wireless’ West Indian (Caribbean) Division. The two parent companies said they would “also form a joint venture to exploit the synergies between their Caribbean and South American operations. “

The Cable & Wireless/Telecoms Italia deal created what was then said to be the world’s second-largest international carrier, handing more than 17 billion minutes of calls a year and serving 1,400 multinational customers in more than 200 cities.

However, the old colonial monopoly giant is losing business in the traditional field of telephone services and the company is moving full ahead with its plans to dispose of its relatively insignificant Caribbean operations. Its strategists in London fear its earnings from international telephone and internet traffic stands threatened by impending market deregulation and, a confirmed thi past week by the company’ top caribbean man, Mr Errol Miller of Jamaica, “the countdown is on”, even though the cmpany is still willing to talk. (Cable & Wireless admitted this past week that it was incensed over the government’s granting of a VSAT license to Helen IT’s Call Centre operation.)

                The company’s threat to pull out was accompanied by an effort to make it appear that it was only interested in pulling out of St. Lucia, and not from the other Caribbean territories in which it also operates. However, the Government of St. Lucia repeatedly stated that its negotiations with Cable & Wireless were taking place within the context of a collective approach by the OECS states to the deregulation of the sub-region’s telecoms environment.

                The deep feeling among the majority here and elsewhere that Cable & Wireless is expected (here and abroad) to eventually lift anchor and pull-out from the Caribbean is conditioned by historical pattern. The company has so far pursued every challenge to its monopoly in the Caribbean in the courts. It took the Jamaican government to court when that country sought to introduce competition. It also took the Dominica government to court for the same reason. It went all the way to the British Privy Council to challenge a lower court ruling that was not favourable to its continuing monopoly in Dominica. Cable & Wireless was so tough in its defiance of competition from a small local company in Dominica that it had to be instructed by the High Court to reconnect the eleven telephone lines of Marpin Telecommunication that Cable & Wireless had disconnected.

                From all the evidence, therefore, it is clear that Cable & Wireless may have singled out St. Lucia for special treatment for taking the first major step to open the British monopoly’s exclusive Caribbean telecommunications markets to competition after 129 years.

                But all that being said, all is not yet lost. The company and the government, in all the cross talk and allegations, have maintained contact. Today they have the possibility of ironing out a solution that would see Cable & Wireless eventually change their minds about pulling out immediately and stay in St. Lucia and the rest of the Caribbean – at least for the time being.

How long the company will remain on these shores and in these isles will be dictated by the sort of agreement it can hammer out in the circumstances. But it’s quite clear -- from all that’s being said by its top executives on both sides of the Atlantic -- that nothing short of a guarantee of nothing less than the level of profit-earning margins the company has been accustomed to over the years will entice it to change its mind about pulling out of the Caribbean.

In the meantime, the company is still seeking greener pastures elsewhere in the new globalized environment where monopolies are being frowned upon and broken up in favour of the more level playing field of the competitive market. Only last week, the European Union threatened to take the Japanese government to court through the WTO if it did not break-up the monopoly of its main national telecoms entity. Similar action has also been taken in the USA several times in recent years, preventing mergers between large telecommunications entities and breaking them up where they have an unfair advantage, or where they did not allow access to smaller competitors. Bell, Microsoft, AOL and Time Warner have all been the subject of such interventions by the relevant federal agencies.

Governments can no longer continue to offer the protection from competition that such monopolies as Cable & Wireless have been able to demand and received, without question, when the company was a flagship of the British Empire and the West Indian colonies were its exclusive protected preserve. Times have changed radically and the company has been changing itself and its manner of operation to suit the times. There is therefore little, if any, reason to believe Cable & Wireless will rescind its policy decision to withdraw from the Caribbean and relocate to greener fields.

It is the responsibility of all the governments in all the affected territories to take the necessary measures to ensure citizens are ensured and insured against unreasonable disruptions in the transition from one entity to a next. This and other assurances have been given by the Government of St. Lucia through the Prime Minister’ address on Sunday last. It is now for the company to cease its hostile reaction, stop playing games and try to hammer out an agreement that will best suit all sides. Compromise is essential in such negotiations and the Government of St. Lucia has gone overboard to demonstrate that willingness to accommodate the company. It is to be hoped, therefore, that today’s discussions in St. Kitts and Nevis will end with the Company, the Governments and People of St. Lucia and the other affected islands agreeing to sail through calm waters instead of rough seas.

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