Guyana: Telecoms Liberalisation: GTT’s complains about potential loss of revenues

  — Despite enjoying decades of massive profits…

Over the years, Kaieteur News has exposed the modus operandi of foreign companies—their Executives enter these shores and cut deals, which allow them to walk away with the lion’s share of the nation’s resources. This trend often contributes to the underdevelopment of country’s industries.

ATNI CEO, Michael Prior

In this special series, Kaieteur News will endeavour to show that the same has occurred with the Atlantic Tele-Networks Inc. (ATNI), the US-based company that owns GTT. Specifically, this newspaper will examine GTT’s monopoly and its effects on Guyana’s development.

All who wish to share in this constructive discourse are welcome.     

Even as the government remains actively engaged in discussions with the Guyana Telephone and Telegraph (GTT) about the liberalisation of the telecommunications sector, GTT has already taken a defensive approach to its potential loss of revenues through its filings to the United States Securities and Exchange Commission (SEC) and by leveraging other unregulated sources of income outside of its licence.

GTT is 80 percent owned by US-based, publicly traded company, Atlantic Tele-Networks Inc. (ATNI). It is led by President and Chief Executive Officer (CEO), Michael Prior.

ATNI has an agreement with the Government of Guyana, signed on June 18, 1990, that allows the company to have the exclusive right over the provision of international voice and data, as then defined in 1990.

This agreement also had the option for renewal of the said deal for 20 years. That option was exercised in 2010 by the PPP regime, extending the monopoly until 2030. The current administration has been negotiating with GTT over the past four years for an agreement to end the monopoly.

In response, ATNI has expressed worry about the loss of revenue that would result were it to lose this monopoly. Further to this, it has informed the SEC that revenue loss is already taking place due to a decrease in customers’ use of its international long-distance business.

The Public Utilities Commission (PUC), which oversees the provision of GTT services under the monopoly agreement, confirms this in its 2018 report, highlighting that there was “a decline in minutes of use of approximately 163 million over the previous year,” partly due to an increase in calls made through internet applications such as WhatsApp and Skype services.

Why this revenue decrease is of significance for ATNI is because, as noted in its 2019 SEC filing, it is dependent on GTT for approximately 23% of its total consolidated revenues. (SEE LINK FOR 2019 FILING –PG 38: https://ir.atni.com/static-files/6081d8f2-e5f2-4736-80b9-5736b3167682).

It is also widely believed that ATNI has used these profitable earnings from its Guyana operations to diversify its business outside of Guyana – all while maintaining a substandard quality and level of services in Guyana, in comparison to the rest of the region and to ATNI’s portfolio.

Take as a classic example, ATNI’s other subsidiary company, Logic, which is based in the Cayman Islands. Logic offers internet speeds 10 times faster (500 Mbps) than the newly built “Blaze” Fiber network for Guyanese (50 Mbps). (See link for Logic’s Internet Packages:

https://www.logic.ky/residential/internet/fibre-internet/fiber-internet-packages).
Simple calculations also reveal that Guyanese are being charged almost three times more per Mbps when compared to GTT’s Cayman counterpart.

In addition to the foregoing, Kaieteur News has learnt via research that ATNI in its 2018 SEC filing said that it aims to offset its revenue declines by increased revenue that it will get from broadband services (SEE LINK FOR 2018 FILING: https://ir.atni.com/node/13776/html).

This is despite, as reported by this newspaper, GTT being chastised by the PUC for its inefficiency in upholding its commitments under its monopoly deal, such as its sloth in installing new landlines and in remedying reported faults (SEE ARTICLE PUBLISHED IN KAIETEUR NEWS ON AUGUST 12, 2018: https://www.kaieteurnewsonline.com/2018/08/12/gtt-complying-with-order-for-350-new-landlines-every-quarter-puc/).

The article noted that the number of applications for GTT landlines was over 16,000, with fewer than half in areas that had little or no telephone infrastructure. This meant that GTT did not require capital-intensive infrastructure investments for the majority of applications, yet the company only installed 350 services per quarter – down from the PUC’s initial request of 1,000 installations per quarter.

Up to the time of that report, industry analysts told Kaieteur News that this amounts to GTT reducing its commitment under its monopoly agreement for the provision of landline services in order to pursue alternative sources of income, such as internet and Mobile Money Guyana (MMG), which are unregulated by the PUC.

This is noteworthy because this essentially enables GTT to determine its own rates without oversight – as evidenced by the permissibility of the almost 60% increase in the lowest price for a basic internet package from $6,599 (DSL) to $10,499, with the introduction of “Blaze.”

Stakeholders in the industry were also keen to note that this strategy has enabled GTT and ATNI to keep gross revenues and profits consistent, even while they continue to push for a considerable list of further benefits as part of its liberalisation negotiations.

These benefits include additional spectrum allocation and tax benefits, even though the company has an outstanding tax claim to the Guyanese Government, through the Guyana Revenue Authority, of US$44 million.
These benefits are also in addition to existing tax concessions (including duty-free concessions) under the 1990 Purchase Agreement, which this newspaper has seen and noted is comparable to that of a state agency – for a private, overseas-based company.

Observers have said that the only silver lining in this situation is that the Guyanese public now has the benefit of hindsight.

They opine that this will enable citizens to use the GTT’s monopoly deal’s proven negative impact on the development of the sector, and the loss of revenue and taxes, as a case study to be even more cautious of future, long-term contracts and their potential, devastating consequences on Guyana.

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Comments

  • brandli62  On February 3, 2020 at 4:49 am

    Granting a monopoly of GTT might have made since in 1990, when the economic prospects of Guyana had not been too rosy and it was difficult to attract a company to provide telecommunication services to the county. Things have not completely change with an economic outlook promising years of exceptional growth. Furthermore, the oil sector will demand state-of-the-art and reliable mobile phone and internet services.

    Given this new situation, the solution to the problem with GTT’s majority owner ATNI seems to me very simple. The next Guyanese government should terminate the agreement with ATNI by the end of 2021. Independent arbitration should be used to define what would be a fair compensation for ATNI given that the current contract is valid until 2030. In the meantime, the Guyanese government should organise an auction of a telecom license for service Guyana. They should put down strict demands what the licensee needs to deliver, if they buy the license:

    1) Establishment and maintenance of a state-of-the-art mobile phone service
    2) Providing fee-based high-speed internet access to the 90% of the population
    3) Maintenance and upgrade of the lang lines in the major urban areas of Guyana

    The license will be subject to annual review and failure to honour the condition of the license will lead to termination within 12 months.

    ATNI is free to apply for a new license in future. End of the story!

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