Govt. offers to sell its shares in GT&T

May 08, 2009 News

…questions company’s annual $1B payout as advisory fees

Winston Brassington

By Tusika Martin
Government has offered to sell its 20 percent shares in the Guyana Telephone and Telegraph Company (GT&T).

Chairman of the Privatisation Union, Winston Brassington, told Kaieteur News that the announcement was made at the company’s Annual General Meeting, yesterday.
The initial offer of sale, he said, is being made to GT&T’s parent company Atlantic Tele-Network Inc.
“We have offered to sell it to ATN, and if ATN does not want to buy it or if we cannot agree on a price, then we reserve the right to sell it to whoever we want.”

According to the Head of the Privatisation Unit, the telephone company’s financial status is excellent, making it a prime time to sell its shares.
“We are hoping to get a very good value…You value your share based on how much money you can make…I do not believe that any other company in Guyana is doing as well as GT&T,” Brassington added.
He stressed that the administration will not ‘give away’ or sell its shares ‘cheaply.’
Even as the administration prepares to sell its shares in the company, yesterday it did not vote in favour of the 2008 accounts.

Speaking about the decision not to vote in favour of the 2008 accounts, Brassington said that Government objected, and did not vote, primarily because they are not satisfied that the six percent advisory fee to ATN is a legitimate expense.
Each year, the company has to pay ATN six percent of its total revenue as advisory fees.
“Last year at the annual general meeting in respect of the 2007 accounts, we had abstained from voting any accounts because we raised some questions about the nature of the services that accompany the six percent advisory fee.”

This particular expense, he said, is not backed by invoices since according to him the company categorizes it as ‘general services.’
“We do not believe that those services amount to a great deal, definitely not worth $1B a year…In the last five years over $5B has been paid as advisory fees.”
Brassington explained that it is believed that the six percent advisory fee is a profit distribution.
As a shareholder, he added, the government should be entitled to its 20 percent shares.
“If it’s treated as profit as opposed to expense, it also means that it would not be deductable for tax purposes.”

He added that ATN has the majority and the company can approve the accounts without the concurrence of the government which is the minority shareholder.
The agreement with the company, he added, states that management services can be acquired but the administration’s contention is that what is being paid to ATN is not ‘backed up’ by any evidence of services.
“If they can prove that they were providing services on an ‘arms length’ competitive services then it would be different but instead they have been consistently been charging six percent of the revenue.”

GT&T’s profit after tax was $4B in 2008 and this was after it had deducted the $1B in advisory fees, Brassington said.
If the $1B expense is not legitimate, Brassington said, then there are several implications including having to pay 45 percent more in taxes and paying more to the government as a minority shareholder.