GT&T’s 20% shares…Govt. may have lost $2B on deal-Chris Ram
Government may have lost out on up to $2B (US$10M) in the sale of its stakes in Guyana Telephone
and Telegraph Company (GT&T) to an Asian company.
According to accountant and business columnist, Christopher Ram, it is still unclear how Government decided on the US$30M price for the 20
per cent shares in that telecommunications company.
Ram, in questioning the deal which was announced earlier this month during a Government press conference, said that while the value of a share in a private company is a subjective matter, the sales of shares in private companies take place regularly and the finance industry has what it calls standard tools for arriving at an indicative price range.
The final price then becomes a matter of negotiation based on the specific facts and circumstances such as whether or not dividends are about to be paid and the net asset value.
Ram, a lawyer and a social activist, said that there are two principal options of calculating as near as possible the value of the shares of a company as a going concern. The first option is projecting the future income stream using past trends and projecting these into the future. The projections would then be discounted into present day value. This method requires a detailed understanding of the company and the use of a number of assumptions.
The other option, which was used by the accountant, is a standard procedure applying what is called the price earnings (P/E) ratio, of the shares of similar company or the average in the industry. Adjusting for special factors, the P/E is then applied to the earnings of, in this case, GT&T. It was using these calculations that Ram arrived at a value close to US$40M.
Ram noted that that company will likely be the only land line telecommunications provider for the foreseeable future. Along with the licence it enjoys, the quasi-monopolistic strength is an important factor.
GT&T is owned 80 per cent by the US Company, Atlantic Tele-Network (ATN). The remaining 20 per cent was owned by the Government under a 1991 Agreement. These have been sold to China’s Datang Telecom Technology and Industry Group which had been identified by Kaieteur News as the Hong Kong-based buyer, long before this was admitted by the Guyana Government.
Datang has also been linked to the Peoples Liberation Army – the Chinese military.
It was one of the companies that had raised eyebrows in October 2011 when a US Pentagon report fingered it as being linked to the Chinese military and as a Chinese Government ‘espionage’ ministry.
Government spokesman, Cabinet Secretary, Dr. Roger Luncheon, in announcing the government’s approval for the 20 per cent shares, said that the money will be paid in two installments– US$25M upfront and the remaining US$5M to be paid over the course of two years.
Up until the sale, the government was receiving from GT&T, an annual dividend of US$2.5M, making it the most successful investment ever undertaken by any administration in this country. In March, two weeks before that announcement, President Donald Ramotar had said that no decision was taken on the sale of the shares.
Ramotar at that time did reiterate that whenever such a sale is made, it “would be in the best interest of the Guyanese people”.
Chief Executive Officer (CEO) of GT&T, Yog Mahadeo, in the wake of the sale, had said that he was surprised at the manner in which the sale was handled. Mahadeo stated that it was only after Dr Luncheon made the announcement and the media attempted to solicit comments from him, that he was made aware that the company’s shares were sold.
Ram said that in a situation where one entity owns 80 per cent in a company, it would be extremely rare for any investor intending to buy the remaining 20 per cent not to have some discussions with the majority shareholder as part of its due diligence.
“I would love to know, and by extension, the people of Guyana…the taxpayers…how government arrived at that US$30M.”