TSTT Matters – How the MASSY-TSTT Merger Affects Us

I: Transparency issues

TSTT’s share purchase agreement, announced on 2 May 2017, to buy Massy Communications Ltd has provoked a great deal of sceptical or negative public comment. I will not attempt a critique of that deal since it is well beyond my scope: in any case, the basic details have not been disclosed. We have been told that the price is $255M and that the deal is conditional upon the approval of the Telecommunications Authority of T&T (TATT).

The furore over this huge deal seems to be fueled by these three statements emerging from TSTT –

  1. Transparency – TSTT cannot reveal the details of the deal to the Parliament’s Public Accounts Enterprises Committee (PAEC) since it is not obliged to follow either the Integrity in Public Life Act or the Freedom of Information Act. Further, TSTT is required, as a listed entity, to follow the provisions of the 2012 Securities Act in regard to the secrecy of pending transactions. What is more, TSTT and Massy Communications Ltd are both bound by a Non-Disclosure Agreement.
  2. Accountability – The $255M purchase price is funded by $1.9Bn which TSTT raised from private lenders, so that money is presumed to be outside the definition of Public Money. One assumes, from the tone of those statements, that TSTT did not require a guarantee or letter of comfort from the State.
  3. Good Governance – TSTT stated that the first time the Cabinet would have been aware of this transaction is via the press. This returns to the issue of just where is the lawful and proper boundary between the Cabinet and the various State Enterprises for which it is responsible. This again sparks the debate as to whether TSTT is really a State Enterprise.

The second and third points will be covered in the next section.

These issues are today centred on TSTT, but there are wider concerns at play since that entity is a Public Private Partnership in which Cable and Wireless (C&W) hold 49% shareholding, with 51% held by National Enterprises Limited (NEL), which is about 82% owned by the State. The State also has the right, under the provisions of the shareholders’ agreement, to appoint the majority of TSTT’s Directors. It seems to me that whatever the shareholding, TSTT is lawfully and effectively under State control. So this current debate also raises many critical points in relation to how we govern PPPs and ensure proper levels of transparency, accountability and good governance in a manner which does not impair the effectiveness of those entities operating in a competitive scenario.

My concerns are with the huge debate around those three statements about that deal, since those go to the issues of Transparency, Accountability and Good Governance. I delved into those issues in relation to TSTT in the Integrity Threat series in these pages between 2013 and 2015. The key issue was the extended litigation, between 2005 and 2013, intended to legally remove TSTT from Integrity Commission oversight. I was also concerned at the decision of the Appeal Court to set aside the late Justice Carlton Best’s High Court 19th July 2010 ruling that TSTT is a ‘Public Authority’ and therefore subject to the Freedom of Information Act (FoIA).

The Appeal Court’s unanimous decision on 27th June 2013 to exempt TSTT from Integrity Commission oversight was severely detrimental to the public interest, I still hold that view. At the time that ruling might have seemed of little importance, but we are now confronting its full, un-Republican, meaning. A PPP funded and controlled by the State, which is exercising market dominance in the critical Information & Communications Technology (ICT) sector is now operating outside our country’s integrity framework. Lawfully so. We must take decisive steps to restore TSTT to the oversight of the Integrity Commission. That will require an amendment to the Integrity in Public Life Act, if we are to avoid the chaos which would ensue if other PPPs were to invoke the TSTT precedent to avoid proper oversight.

The idea that TSTT is not subject to the FoIA is just that, a mere idea. The only case of which I am aware, after diligent enquiry, of TSTT being subject to court rulings on this issue, is the 2006 litigation brought by Magdalene Samaroo under the FoIA to seek publication of a 2005 Integrity Commission letter to the then Directors of TSTT to advise that they were not required to submit declarations. TSTT appealed the July 2010 High Court ruling and those proceedings were discontinued by agreement on 28th October 2013. The closing statements of Justice of Appeal Jamadar were –

“…the appeal is compromised, we can set aside the decision of Justice Best and enter the Order that there be no Order to costs which does three things, or two things, at least: it meets your agreement; it removes the precedent that is creating some difficulty for you, and the third thing I was going to say, it preserves for us the opportunity if it comes again, to reconsider the issue…
(emphases are mine)

So the Appeal Court made no decision on the issue before it.

On 5th November 2013, the Judiciary also made a formal statement on the issue. This is the key message from that statement –

“…the matter before the Court of Appeal was settled without argument and the Court made no determination as to whether TSTT was or was not a public authority for the purposes of the Freedom of Information Act…”.

The existence of that scandalous letter from the Integrity Commission to the TSTT Board was never denied in all the litigation. Just imagine that.


II: Accountability & Good Governance

 

 

The previous section examined the transparency aspects of TSTT’s May 2017 agreement to buy Massy Communications for $255M. The 2005 litigation between TSTT and the Integrity Commission was meant to lawfully escape the oversight which had been intended by the Parliament. Both sides wanted that result and it was achieved via the 27 June 2013 Appeal Court ruling. The Integrity Commission wrote at the start of that litigation, in 2005, to exempt the TSTT Directors from the requirement to submit declarations of their assets, liabilities and income. That exemption letter was the subject of 2006 litigation under the Freedom of Information Act, resulting in a 2010 High Court ruling that TSTT is a ‘Public Authority’ and ordering that the letter be published. The matter was immediately appealed, but that litigation ended by agreement on 28th October 2013, with the High Court ruling being set aside.

These facts are being restated as a corrective to the notion that the concerns emerging about the TSTT deal are current. There is a deeply-rooted and long-term strategy to dismantle our country’s Integrity Framework via a ‘collaborative courtroom consensus’. The Courts were used by certain Public Institutions to thwart the intent of the Legislature, by obtaining certain rulings. Those institutions were the Integrity Commission and TSTT, with the active support of the AG’s office.

There are two stark lessons here –

  1. firstly, the ‘powers that be’ rely on our declining collective attention-span to deploy these un-Republican schemes and
  2. secondly, the ‘Public Interest’ is treated with hostility by the very public officials we have entrusted to safeguard it.

Now, onto the Accountability and Good Governance issues emerging from this TSTT matter.

We were told that the $255M purchase price for Massy Communications is to be funded by $1.9Bn which TSTT raised from private lenders.

TSTT stated at the outset that the loan was needed to retire $1.1 Billion in short-term loans and replenish its cash reserves by $800M spent in meeting various backpay commitments. Maybe there had been a change in requirements, so to speak, which can happen in any dynamic situation. The original explanation differs from the one we are hearing now. Of course that observation likely has some bearing on the strategic plan approved by Cabinet. I do not think that the strategic plan should be published, given that this is a competitive situation. My concern here is on the issue of borrowings and the purpose for which those are made.

Apart from the purpose of the loans, one has to consider the nature of the money. These funds were borrowed on the private market and TSTT was emphatic in stating that it has never needed a State guarantee, so one assumes that this also applied to the 2016 loan. Public Money is raised, or guaranteed, via legal, but involuntary methods, such as taxation. It must therefore to be accounted for and managed to a higher standard than Private Money.

The modern definition of Public Money, which can be found in the new Public Procurement and Disposal of Public Property Act, includes –

…“public money” means money that is—…

  1. ) raised by an instrument from which it can be reasonably inferred that the State accepts ultimate liability in the case of default;…

TSTT is a State-controlled entity which operates as a Public Private Partnership, which is accountable to Parliament’s Public Accounts Enterprises Committee (PAEC). It is therefore a reasonable inference that, in the event of a default by TSTT, the State would have no choice but to ‘accept ultimate liability’ and meet the shortfall. The alternative, in which TSTT defaults, would likely have an immediate adverse impact on the State’s credit rating. All the money owed to TSTT, payable by TSTT or borrowed by TSTT is therefore Public Money, even if there was no explicit State Guarantee or Letter of Comfort, that is my view.

The Good Governance aspect is now subject to the perennial dispute as to whether State Enterprises are obliged to follow Cabinet instructions. In this case Cabinet’s 2016 approval of a 5-year strategic plan is being invoked by TSTT, amidst a swirl of conflicting versions from the Cabinet. The Companies Act and case law is clear that the responsibility for the direction and control of a company lies with its Board of Directors.

But the State Enterprises Performance Monitoring Manual (2011) states, at 3.1.14 –

“…State Enterprises or their subsidiaries are required to obtain prior approval of the Minister of Finance for the acquisition of significant assets, new investments in non-government securities, the incurrence of new/additional long- term debt and entering into significant contracts (relative to the Company)…” (pg 22)

All of this brings into focus the issue as to whether TSTT is truly a State Enterprise as that will surely have a bearing on the approvals required for this deal.

Finally, although this deal is cast as a 100% share-sale, I am intrigued by Massy Group CEO, Gervase Warner’s optimism

“…Together the two organisations will be a much stronger and more effective competitor in the high-speed broadband and HD TV segment of the sector…”.

The Telecommunications’ Authority has required that Cable and Wireless’ 49% block of TSTT shares must be sold by the end of June 2017, so a more complete picture would soon be emerging. Certainly the disposal of a Public Asset of this size and importance must occur in the most transparent manner possible.

If detrimental decisions were made by the TSTT Board, there is still the option for the State to take action under S99 (1) of the Companies Act as pioneered in the UTT and ETeck cases, even beyond the four-year rule in the event of a change in government.

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