Understanding the Speednet deal in plain language, before Cabinet decides on Tuesday

By Horace Palacio:

Next Tuesday, August 18, Cabinet will announce where the Government of Belize stands on the biggest business transaction in this country in years. Yesterday, BTL, the Public Utilities Commission, and the Social Security Board made their presentations behind closed doors in Belmopan. On Thursday, the Chamber of Commerce and the unions get their turn. Then the ministers decide.

Which gives every Belizean six days to actually understand this deal, not just shout about it. Last week I gave you the ledger of arguments for and against. Today I give you the instruction manual. Plain language, kitchen table, no jargon left standing.

Start with the cast of characters, because half the confusion dissolves once you know who is who.

Speednet is the company behind Smart, the second of Belize’s two phone and internet providers, and it is associated with Lord Ashcroft’s business interests. Speednet is the seller.

BTL is Digi. It is majority owned by the Government of Belize, and the Social Security Board, the keeper of every Belizean worker’s pension contributions, owns another 34.2 percent. Follow that ownership to its end and you arrive at a simple truth. The buyer in this deal is, ultimately, the Belizean public. You.

The BTL board of directors approved the purchase on August 4. The Public Utilities Commission is the legal referee, the body the Telecommunications Act requires to approve or refuse the deal, and it confirms the matter is live before it, which is why it cannot comment. Cabinet is the government deciding its official position on Tuesday. And standing opposed or demanding answers, an unusually broad wall, the Chamber of Commerce representing more than six thousand employers, the National Trade Union Congress, the parliamentary Opposition, all four independent senators, and as of this week, a coalition of media owners warning that a telecom monopoly holds the pipes through which a free press must flow.

Now, what exactly is being bought? Not a partnership, not a share. One hundred percent of Speednet, the towers, the fiber, the spectrum, the customers, the brand, everything. If this completes, Belize goes from two major telecom providers to one. That single sentence is the heart of the entire controversy.

Next, the money, and let me shrink 80 million dollars down to a fruit stand.

Imagine buying a fruit stand for 80 dollars. The stand earns 19 dollars profit each year. Divide one by the other and you recover your money in about 4.2 years. That, in essence, is BTL’s claim, an 80 million dollar purchase that pays for itself in roughly 4.2 years, calculated, the company says, on a discounted basis, meaning it accounts for the fact that a dollar next year is worth less than a dollar today. BTL adds two important assurances, no borrowing is required, and not one new dollar comes from Social Security. The purchase, it says, is repaid entirely from Speednet’s own future profits.

Here is where the dispute lives. That 4.2-year figure depends on how much fruit the stand actually sells. The financial model was prepared by Moore Belize, a firm the unions note was hired and paid by BTL, the buyer, and which they say has ties to the BTL board. That model reportedly assumes Speednet earns about 69 million dollars in revenue at a 66.5 percent profit margin, a margin far richer than BTL’s own 44 percent. Analysts who believe Speednet’s real revenue sits nearer 28 to 32 million calculate a very different answer, a payback of somewhere between 13 and 25 years. And the company’s own projections reportedly show combined revenue barely growing after the merger, under one percent a year, which means the promised jump in profits leans heavily on cutting costs, power, software, maintenance, and the duplicated departments, sales, marketing, human resources, finance, IT, purchasing. Behind those department names are Belizean workers, and the scope of redundancies has not been disclosed. Same stand, same price, two wildly different stories, and the difference is simply whose numbers you believe. Which is precisely why critics demand Speednet’s audited books and an independent second valuation, and why that demand is reasonable regardless of which side you favor.

Now the law, in one breath. Section 42(4) of the Telecommunications Act forbids agreements that significantly lessen competition in telecommunications. Buying your only major competitor is the textbook example, which is why opponents call the deal unlawful on its face. Belize, the Chamber adds, has no general merger or competition law at all, so the PUC’s review is the only legal checkpoint this transaction must pass. BTL’s chairman, to his credit, said it plainly this week, “We need to have the PUC’s approval,” and insists the company will follow the legal process rather than maneuver around it. The Chamber’s president, for his part, fears the board’s early vote signals a foregone conclusion and that the review may prove a formality. Both statements are now on the record. Tuesday begins the test of which one history vindicates.

One more new piece entered the picture this week, and it deserves plain explanation. BTL announced it has agreed to a three-year pause on rates, and that after those three years, any price change must be justified. That is a welcome word. But understand the difference between a pledge and a condition. A pledge is a promise a company makes in a press conference. A condition is a requirement written into a license by the regulator, enforceable in law, with penalties for breach. The three-year pause currently lives in the first category. Whether it moves to the second is one of the most important details to watch.

So here is your map of the road ahead. Thursday, the Chamber and unions present to Cabinet. Tuesday the 18th, Cabinet announces government’s position. After that, the final purchase agreement must still return to the BTL board for approval, and the PUC must still conduct its review and rule. Court challenges remain possible at several points. In other words, despite the noise, this deal is advanced but not finished, and the windows for scrutiny are open right now.

Watch three things in the days ahead, and you will understand everything that follows. Watch whether Cabinet demands the documents before blessing anything, the audited financials, the independent valuation, the published workings, the redundancy plan. Watch whether the rate pause becomes a binding license condition or remains a promise. And watch whether the PUC’s review is conducted as a genuine public examination or a quiet stamp.

I promised you no verdict today, and I keep my promises. The judgment on this deal belongs to Belizeans, and Belizeans are perfectly capable of making it, once armed with understanding.

You now hold the manual. The company is yours. The pension money is yours. The phone bill is yours.

Tuesday is six days away. Watch it like an owner.

The views expressed in this article are those of the author, Horace Palacio, and do not necessarily reflect the views or editorial stance of Breaking Belize News.

The post Understanding the Speednet deal in plain language, before Cabinet decides on Tuesday appeared first on Belize News and Opinion on www.breakingbelizenews.com.