Sale of 20% share…Chinese buyer arrived at US$30M price after inspecting GT&T’s books-Luncheon

Apr 29, 2012 News

Government has defended the US$30M selling price of its 20 per cent stake in the Guyana

Dr. Roger Luncheon

Telephone and Telegraph Company (GT&T). A government spokesman said that last week the approved Chinese firm examined the books of the communication giant before arriving at its decision to buy.
That US$30M price tag had raised questions with accountant Christopher Ram even writing about the matter in his weekly columns in the Stabroek News.
Ram, speaking with Kaieteur News last week, said that Guyana may have lost almost $2B more on the price when it sold its 20% stake in GT&T to Datang. The shares, he believes, are worth US$40M, using standard accountant calculations.
But questioned on Thursday about how government arrived at that US$30M figure, Government spokesman, Dr. Roger Luncheon, said that the Hong Kong-based, China’s Datang Telecom Technology and Industry Group conducted its due diligence before it arrived at the price.
“The Chinese firms came here and they looked over GT&T’s books… they worked with GT&T and they found a way-I am no financier- of costing the company.”
“…You could actually say on that (US$30M) costing that there is an understanding that GT&T’s shares probably can be capitalized at US$150M right now. That is what it seems to be saying.”
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.
Guyana had up to recently been earning an average of $500M annually from its shares.
Questioned about whether the dividends were included in the sale price of US$30M, Dr. Luncheon, made it clear that the payments by GT&T were not something that Government had been happy about and it also was a major factor in the decision to sell the 20% stake. As a matter of fact, there is a court case over the dividends.
“Well number one, we have not been paid the dividends the way we were supposed to be paid… anyhow. So that is a potential loss of revenues. We are in court now about that matter. Billions of dollars in dividend payments were not paid in the early 90’s but apart from that, we have sought to work with GT&T to explain why we are now going to dispose of these shares and they have offered a number of options.

Christopher Ram

“Why don’t we buy them out? We say why don’t you buy us out? Or let’s find a third party to buy both of us out.”
Ram, last week, 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 as an important factor in any company investing.
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.
Dr Luncheon, in announcing the government’s approval for the 20 per cent shares in early April, 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.
Initially, when the shares were placed on the market over two years ago, employees had offered to buy them but this was rejected by Government who wanted them to be purchased en bloc.
Government has been actively attempting to liberalise the telecoms markets to allow other players but the process has been stymied by delay in passing key legislations.