Prime Minister's Address to the Nation on Cable and Wireless - Sunday, February 18, 2001

By Prime Minister Hon. Dr. Kenny D. Anthony

Good Evening Fellow St. Lucians,

Over the last few weeks our country has been pre-occupied with the notice given by Cable and Wireless of its intention to pull out of St. Lucia. Understandably, this has given rise to much uneasiness, especially among the staff of Cable and Wireless. However, whilst I have been very mindful of your concerns, I felt it fitting that I should first hold discussions with my Prime Ministerial colleagues of the OECS, before addressing you on the matter, since our negotiations with Cable and Wireless are best handled, for obvious reasons, within a collective regional framework.

Having met the OECS heads on Friday, February 16^th, it is now incumbent on me to dialogue with you on the issues and to make the government’s stance clear to you.

Many of us have understood by now that the issue of liberalisation of trade and services cannot be avoided by people anywhere in the world. Our banana farmers understand this only too well, as their protected markets have been replaced by free access to the European market by all banana producers. The emphasis was on getting the cheapest price for banana consumers in Europe.

It is for similar reasons that the issue of liberalisation of the telecommunications industry has become important in St. Lucia and the OECS today. Everywhere, and in every trade, industry and service, monopolies are being replaced by open competition, offering a wider range of services, greater choice and, of course, a cheaper price to consumers. Indeed, only two days ago, the European Union (EU) threatened to take Japan to the World Trade Organisation (WTO) to enforce compliance with its liberalisation obligations in the telecoms sector. These issues must be understood by all St. Lucians as we examine the situation currently existing with Cable and Wireless today.

The Government of St. Lucia is aware that Cable and Wireless has in recent times refashioned its corporate strategy. The Investor’s Chronicle, a respected and well-known British publication that serves as a guide to the world’s biggest investors and investment firms, in its issue of January 27, 2001, reports that "Cable and Wireless is completing its transformation from telecoms conglomerate to specialist provider of voice, data and internet services to business". Crucially, the Investor’s Chronicle reports too that, "the Caribbean assets will also go once regulatory hurdles have been cleared".

A financial report from Baron’s Online dated February 12, 2001, says, "Britain’s Cable & Wireless has been busy shedding assets – particularly wireless assets. Gone is the company’s 20% stake in Bouygues telecom, a French wireless operator. Gone is its majority stakes in Hong Kong Telecom. Gone are its British cable TV assets. And most significantly, with Australia’s second largest wireless operator, Optus, on the block, Cable & Wireless’ 52.5% stake in that company will soon be gone as well."

Whilst we move into a new liberalised environment, it is important to remember that Cable and Wireless has been in the Caribbean for 129 years. Further, for over thirty years, Cable and Wireless has operated in St. Lucia as the sole provider of telecommunications services. During this period, St. Lucia proved to be an extremely lucrative market for the Company.

If Cable and Wireless chooses to leave St. Lucia, then it could not possibly be justified on the basis of its past financial performance. Between 1996 and 2000, Cable and Wireless’ before tax profits increased by 42.34%. In 1996 the chargeable income of Cable and Wireless stood at 34 million dollars, and in 2000 this had risen to almost 60 million dollars. In 1996, the Company’s after tax profits stood at 23 million and by 2000 had risen to 40 million. The increase in profits by the company was high and consistent between the years 1996 to 2000.

Unquestionably, S. Lucia has been a very profitable operation for Cable and Wireless. Is it that Cable and Wireless really feels that its profitability will no longer be protected by an exclusive licence? Like you, the Government can only speculate.

This government has never asked Cable & Wireless to leave Saint Lucia - either directly, by behaviour, subtle signal, or otherwise. In my discussions with Cable & Wireless, I have repeatedly made three basic points.

Firstly, Cable & Wireless has operated for such a long time in the region that it is for all practical purposes, part of the Caribbean landscape and a household name in Saint Lucia. On the positive side the company has made significant strides in providing Saint Lucia with modern telecommunication facilities.

Secondly, if Cable & Wireless chooses to make an exit, then that decision is entirely theirs.

Thirdly, the Government of Saint Lucia expects Cable & Wireless to adapt to the liberalized and competitive telecommunications environment, as is the norm and practice globally.

Cable and Wireless now enjoys four different licences in St. Lucia:

1. The Domestic Telephone Agreement of 1980, which expired in September 2000 and was extended to March 31^st 2001 by this government.

2. The External Licence of 1969, which was due to expire on March 31^st 1994, but was extended to coincide with the termination date of the domestic licence, now set at March 31, 2001.

3. The Boatphone (Caribbean Cellular) Agreement of 1993, which expired on January 1^st 2000, but was extended to March 31^st 2001.

4. And the Cable TV Licence of 1986, which expires on October 31^st 2001.

An examination of the way in which successive governments of Saint Lucia have treated the licences of Cable and Wireless will indicate the country’s willingness to accommodate the Company and to approach the question of liberalisation of telecommunications with a spirit of compromise.

On several occasions, the government has extended the licences of Cable and Wireless well past their original dates of expiration. These extensions not only provided the company ample opportunity to prepare for eventual liberalisation, but also signalled, in a powerful way, the government’s intentions to work in an atmosphere of good faith and compromise with Cable and Wireless. In addition, our new Telecommunications Act which comes into force on April 1^st, 2001, provides Cable and Wireless a further six months to operate under the existing licence, bringing the termination date of the existing licences to October 31^st 2001.

It must be remembered that the OECS governments had informed Cable and Wireless of their decision to liberalise the telecommunications industry from as early as October 1998. This means that Cable and Wireless was given a period of three years to prepare for eventual liberalisation.

An examination of the main points of disagreement between the OECS governments and Cable and Wireless suggests very strongly that Cable and Wireless is essentially fearful of, or uncomfortable with, the modern day practice and trend towards liberalisation of telecommunications. The company left Hong Kong and other parts of the world when faced with competition; and right here in the Caribbean, it took both Jamaica and Dominica to court when faced with the possibility of local competition.

How else can we explain Cable and Wireless’ opposition to the licence that we have granted to Helen IT Services to operate a call centre here in St. Lucia? Although Cable and Wireless insists that it is not opposed to liberalisation, it claims in a full-page advertisement in the local and regional press that government’s decision to grant a VSAT Licence to Helen IT Services is inconsistent with the new Telecommunications Act and the extension of Cable & Wireless’ licenses.

It is baffling that Cable & Wireless would challenge our decision to grant such a license mere months before the expiration of its licence that the government so graciously extended. Is it that Cable & Wireless does not care about the hundreds of St. Lucians who are now employed, but cares only about the sanctity of its licenses?

Helen IT currently employs 600 St. Lucians. It is the first time in several years that any company in this country has employed as many as 600 St. Lucians. I will not allow Cable & Wireless to stand in the way of providing jobs for the people of St. Lucia. If this government has to issue other licenses to provide jobs for St. Lucians, this government will do so again.

Indeed, Helen IT system is a strong indication of the advantages that can be gained from the liberalised environment, which we have put in place. It is the responsibility of this government to provide jobs for the people of St. Lucia, and we will not shirk from this responsibility.

It is very unfortunate that some groups have decided to use St. Lucian workers to create an atmosphere of hostility against the government. Such groups, if they have St. Lucia’s interest at heart, should show greater sensitivity to the fears and concerns of workers. They should move quickly to put an end to the psychological warfare, which they have waged against these workers and the people of St. Lucia, and should remove the uncertainties that currently exist in the minds of these workers, many of whom have given years of dedicated service to the company. If Cable & Wireless is one of these groups it should be open and honest with its workers and should let St. Lucians know that its decisions are cold commercial decisions, and are not due to a particular St. Lucian peculiarity.

I would like to say to the employees of Cable and Wireless that the government is very aware of your concerns. I urge you to be strong in the face of threats, rumour and innuendo. I want you to realise that you are now fully competent to take over the running of the telecommunications industry in St. Lucia. Your competence is the direct result of the policy of this and previous governments, which pleaded with Cable and Wireless to employ more locals in the running of the industry. Today, there is only one non-national at the managerial level employed with your Company in St. Lucia. I may add too, that there are St. Lucians abroad who have both the technical and managerial capabilities to run telecommunications companies such as Cable & Wireless.

I want to urge you to have more confidence in your own strengths and capacities. Just as St. Lucia created the National Commercial Bank and the St. Lucia Development Bank after the withdrawal of Chase Manhattan bank, so we should not place limits on our capacity to manage the telecommunications industry in St. Lucia. I want to urge you, the workers of Cable and Wireless, not to allow yourselves to be used against the interest of your country. You must attempt at all times to grasp and understand the issues in a broad and holistic way, and should give due consideration to the long-term interests of your country.

Finally, I want to re-assure you that your company has not closed the door on a continued presence in St. Lucia. Your reactions should therefore be guided by the facts, and you must try to overcome defeatism and negativity in this period. Employees of Cable & Wireless, you must remember that your skills will be needed in any post-Cable & Wireless environment. This period, therefore, calls for the highest levels of professionalism and commitment on your part, as prospective companies will be monitoring how well you respond to this challenge. You owe it yourselves to give a strong account of your stewardship.

I want to assure all St. Lucians that the entire OECS sub-region has an interest in the outcome of our deliberations with Cable and Wireless, as they too have seen the necessity for liberalisation. It is for this reason that our governments have formed ECTEL as the umbrella body to handle an independent, transparent and non-discriminatory regulatory environment. In addition to signing the agreement giving birth to ECTEL, the Heads of Government have agreed:

1. That the new telecommunications legislation should be introduced by the member states;

2. That the OECS should review their licences with Cable and Wireless; and

3. That Cable and Wireless should be forthcoming with the cost data of telecommunications services

The main negotiating position of the OECS team has been the following:

1. That it will not compromise on the principle of non-exclusivity in, and/or liberalisation, of telecommunication services.

2. That Cable and Wireless will not, and cannot, function in the capacity of a "regulator" in a liberalised environment in which it is itself a competitor.

It is important to note that a number of OECS territories have already enacted legislation which would bring to an end Cable and Wireless’ exclusive licences. In fact, whilst in St. Lucia Cable and Wireless’s licence is due for expiration in March 2001, some OECS territories have actually enacted legislation which cancels the licences of Cable and Wireless. Indeed, as a consequence of the early termination of its operating licenses in Grenada and St. Kitts and Nevis, Cable and Wireless intends to pursue legal remedies against these governments.

It is clear that what is unique in the St. Lucian case is the fact that Cable and Wireless’ licences are due for expiration as early as March 2001. The company is not only unable to bring a legal challenge to the St. Lucian position, but has also decided to take a hard line with St. Lucia, in order to signal the conditions for future actions in the rest of the OECS.

It is instructive that St. Lucia is the only territory in the Caribbean from which Cable and Wireless has threatened to withdraw.

I am happy to report however, that following our Barbados meeting, the OECS territories has made it clear to Cable and Wireless that they will not agree to any attempt to isolate St. Lucia from the rest of ECTEL. I am also happy to report that following a meeting in Barbados with Mr. Errald Miller, the Regional Director of Cable and Wireless, the Company has agreed to meet with the OECS heads on February 21^st in an attempt to reach an understanding on the outstanding issues.

Now what are the main points of disagreement between the government and Cable and Wireless?

The first issue is the question of rate re-balancing. Cable and Wireless is insisting that since the bulk of its profits are made from international calls, and since a major lowering of international rates is anticipated in a liberalised environment, then the government should increase domestic telephone rates in order to offset the anticipated reduction in profits.

Ladies and gentlemen, given this government’s commitment to protect the St. Lucian consumer from exorbitant rates, you can understand our difficulty with this proposition. We have made a pledge to seek a reduction in telecommunication rates and provide a wider range of telecommunications services to St. Lucians and we fully intend to fulfil this pledge. I cannot agree to increase domestic rates so soon after securing re-adjustments in rates. Moreover, the government is not satisfied that Cable and Wireless has been as forthcoming with the data from which an accurate assessment of its cost structure can be made, as requested by the governments of the OECS.

The second issue pertains to the phasing of competition. Cable and Wireless insists that there must be "regulatory certainty" before it can agree to a liberalisation schedule. Under its proposals for regulatory certainty, Cable and Wireless is calling for an agreement with the OECS governments which cannot be altered without the consent of the company within the next two or three years. Cable and Wireless is also willing to forgo all claims for compensation once a framework of "regulatory certainty is established". Cable and Wireless has provided a draft Memorandum of Understanding and Regulatory Principles Document and wants the setting up of a Consultative Group that will be responsible for the drafting of the new regulatory framework. Cable and Wireless wants to be a key player on the consultative Group.

Government’s response to this is two-fold:

First we cannot allow Cable and Wireless to function in the role of a "regulator" in an environment in which Cable and Wireless hopes to participate as a competitor. This will be grossly unfair to any new telecommunications provider, which seeks to establish operations in St. Lucia. Further, the role of regulator can only fall to an independent body, which would be impartial to the concerns of both telecommunications service providers and the consumers.

Secondly, we are firmly of the view that Cable and Wireless has been given sufficient time to prepare for a new liberalised environment.

Moreover, as the established player in St. Lucia, Cable and Wireless is well placed to out-perform any new competitor, which may emerge in St. Lucia. Cable and Wireless should therefore seize the opportunity to widen its customer base in St. Lucia and to truly become the leading provider of telecommunications services to the St. Lucian public.

The third issue of disagreement with Cable and Wireless is the question of interconnections. We have insisted that interconnection should be provided to all operators on fair, non-discriminating and cost-based terms, and that disputes between providers would be settled by the independent regulator.

The Government of Saint Lucia has always held the view that the issues which face the parties can be resolved by compromise and goodwill. The issues are not intractable, but Cable and Wireless needs to appreciate that while we will try to be fair, we have an obligation to safeguard Saint Lucia’s interests. Consistent with the statement issued by the Heads of Government of the OECS, Saint Lucia will be part of the team which meets Cable and Wireless in St. Kitts-Nevis on February 21^st 2000.

However, we must be realistic. We must, therefore, be prepared to manage the transition from Cable and Wireless should it become necessary to do so. It is the government’s view that the country as well as our regional partners must be unified in their approach to Cable and Wireless. The transition, if it occurs, must be a shared responsibility. For that reason, Government has appointed a team comprising a government representative, a representative of the private sector, and a representative of the employees to ensure, along with the government, that the interests of the workers are fully protected. Several interested parties in the international environment have promised technical, financial and economic assistance.

The team will be led by Mr. Marius St. Rose, Managing Director of the National Commercial Bank and 1^st Vice President of the Caribbean Development Bank, and will comprise Mr. Geoffrey Devaux as the representative of the Private Sector. It will include Mr. Anthony Astaphan, a Dominican Attorney, who has advised the OECS on telecommunications matters. Other members, including the representatives of the workers, will be announced later.

The team will report directly to a cabinet sub-committee comprising the Prime Minister as chairman, the Attorney General and the Minister for Communication, Works,Transport, and Public Utilities.

In closing, in the event that Cable & Wireless terminates its association with Saint Lucia, I want to assure the nation, consumers and the workers of Cable & Wireless of the following:

1. Telecommunications services will continue as normal on the expiration of the various licenses. All the existing agreements guarantee the transfer of assets to the Government of Saint Lucia. This will ensure a continuation of service after the expiration of the various licenses currently held by Cable & Wireless.

2. The Government of Saint Lucia has absolutely no interest in owning or operating telecommunications facilities in Saint Lucia. While the agreement calls for the company to dispose of its assets to the Government of Saint Lucia, the government intends to divest these to a limited liability company owned and managed by an internationally reputable, strategic investor, Cable & Wireless staff, St. Lucian subscribers and other investors mainly from the region.

3. All existing Cable & Wireless Staff are assured of their continuing employment in any successor entity on terms and conditions to be determined by the successor operator. However, members of staff who wish to separate from any new entity will receive all terminal benefits that they are entitled to. This is guaranteed by the existing agreement between the Government of Saint Lucia and Cable & Wireless. However, we will hope that all staff will recognise and seize the opportunity and challenges that this new environment opens up for their career development.

In the case of any doubt, let me make it clear that the Government and people of Saint Lucia are very welcoming of foreign investors. We will make every effort to attract and retain such investors but it must be on a basis that is mutually beneficial. Towards this end, I urge cable & wireless to understand the dilemma and aspirations of a small developing country such as ours, struggling in a fiercely uncompromising liberalised environment.

To the nation, I wish to assure you that your interests will be jealously guarded by the government as we always pledged.

I thank you and good night.

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