Oct 2005 Financial News

Govt has no plans to divest TSTT

Oct 06, 2005

The head of the Government’s divestment secretariat has shot down hopes by the UK telecom giant Cable & Wireless that T&T would be selling its 51 per cent stake in TSTT to the 49 per cent minority shareholder any time soon.

Hospedales was speaking in an interview with the Business Guardian at his office in the Ministry of Finance last week.

He said that TSTT’s value be enhanced before the State considered selling it.

“Why I wouldn’t privatise it, is that I think both Government and C&W are interested in value. And we believe that if I were to put a value on TSTT right now, we might lose because we would not put a good value on it,” Hospedales said.

“We are working but, at this point in time, both parties (the Government and Cable & Wireless) agree we should address the matter. And this week I am meeting with them on the shareholder issue.

“Both shareholders will sit down and we are trying to work out the best way to ensure that this company is nimble, that this company is sharp and it can tackle regulations and, in the final analysis, bring value to the TSTT’s shareholder and the Government. I think that what we are doing is correct,” he said.

He said it was in the interest of the Government to ensure that TSTT’s value was maintained or increased in the interest of National Enterprises Ltd’s 6,000 shareholders. T&T’s 51 per cent holding in TSTT is vested in NEL which also holds the State’s 51 per cent stake in the National Flour Mills, Tringen and smaller holdings in Phoenix Park and Atlantic LNG.

“What we need to do is overhaul the company and we have clear ideas on how to go about it. I don’t want to privatise it now,” he said.

“What we believe is that we should put the company in a mode in which it can tackle this competition and must effectively deliver affordable services to the national community, then you can probably determine the value of the company.

“And then probably extract value from it for your shareholders. I don’t think it will be a good idea for me as chairman of NEL or the Government to do something where we will not get value for the shareholders. I have to extract value for them,” he said.

He said he is always faced with the debate that the Government cannot both be a player and a regulator in the market.

“Right now, what we are trying to do is ensure that TSTT is capable of meeting that regulatory and competitive environment in a playing field,” he said.

NFM

Hospedales said both the NEL and the ministry are evaluating the present business model National Flour Mills “with a view to making a decision on how we treat NFM in the future.” He said the company is faced with competition and technological advances so there was need to overhaul a new strategy.

But NFM is sitting idly by. He noted that the state-of-the-art flour mill will help contain costs in terms of economy of scale.

But how feasible is NFM to NEL given the company’s declining profits?

The company showed a decrease of $5.7 million or 40.6 per cent in after tax profits from $14 million in 2003 to $8.3 million in 2004.

Hospedales noted that when the Government sold NEL to the public, NFM was included in it.

“Whatever decision we take, we have to be careful because we have 6,000 shareholders. This is not a simple government divestment at all because of the NEL component. So we have to be assured that whatever we do adds value to the shareholder. There are ways with which we could reorganise NFM and restructure NFM to restore its profitability,” he said.

Tanteak

Hospedales said the Government was now in the process of sending out information on a memorandum for the purchase of the assets of Tanteak.

“A new investor will be given an opportunity to purchase the assets but he would not have automatic access to the teak and pine resources that Tanteak had. The investor would have to be on the same footing with all the other sawmillers,” he said.

Hospedales noted that the assets have not depreciated in value.

Asha Javeed
The Trinidad Guardian
Business Section
Thursday, 6th October, 2005
http://www.guardian.co.tt/bussguardian8.html