Telemedia’s AGM addresses Accommodation Agreement
“The Belize Telemedia AGM was held on 26th, November, under the auspices of Keith Arnold, Chairman of the Board. In addition to the explanation of price reductions, improvements in service, community contributions, and the investment and development of Channel 5, as well as the achievement of 15% return on investment, some interesting and disturbing points were made by Dean Boyce, Chairman of the Executive Committee to Telemedia shareholders with respect to the Accommodation Agreement.”
Dean Boyce
“To-date, no attempt has been made by the Government to explain to Telemedia why after all this time the Agreement is invalid. Neither has the Government chosen to participate or present its position in the arbitration case currently before the London Court of International Arbitration (“LCIA”), even though this was the agreed forum for the settlement of all disputes between the parties.
The question has to be asked: if the Government has as strong a case as it says it has with respect to the validity of the Agreement, then would the LCIA case not provide an excellent opportunity to put this matter to bed once and for all. Would it not be better for this matter to be decided by a panel of international arbitrators rather than through the continued shouting in the media, which at the end of the day does nothing but damage the reputation of Belize.
The latest twist is that the Government has now decided that it wants to recover certain payments which it believes Telemedia owes to it under the terms of a loan note which forms an integral part of the Accommodation Agreement; by increasing the rate of Business Tax applicable to telecommunication services to a whopping 24.5% of gross revenues!
The Government knows that no other country in the region, and probably not in the World, levies tax on this basis. At a time when Telemedia has been reducing prices and reducing profit margins, a tax increase to 24.5% of gross revenue would mean for example, that Telemedia must make a 25% profit margin, just to break even, and of course, to make a reasonable profit will have to push-up prices and margins even further. At a time when governments around the world are reducing taxes to stimulate the economies, the Belize Government is unbelievably increasing taxes.
Why also would the Government wish to levy this tax rate on all the other telecommunications operators simply to recover monies from Telemedia?
Also, it is absolutely amazing that the Government expects to recover the value of the properties sold to Telemedia under the Accommodation Agreement even though it considers the Agreement itself to be invalid.
As a direct consequence of this Agreement, the telecommunications industry in Belize has been able to recover and make some dramatic improvements over the last three years.
With both parties having complied with the terms and the spirit of the Agreement since 2005, demonstrated on Telemedia’s part by reduced prices, the deployment of the new rural wireless network, and free internet for schools, to name but a few, the Government is now reneging on its contractual commitments, and making up a range of unsupportable excuses and reasons.
In light of this background, Telemedia must now decide what actions it is going to take moving forward. What is certain is that Telemedia can no longer continue as planned. The company must also be very concerned in the current environment as to the possible extreme measures that the Government may now take.
Telemedia also expects before long the Government to support a new “Intelco”, which will no doubt be owned by Government supporters, who will then no doubt be granted the same concessions that Intelco was. This new entrant will again target, the larger and more affluent customers such as the banks, the higher income residential customers, and the Government. That sounds familiar!
Telemedia is already carrying an enormous burden of providing subsidies for the low income customers running into tens of millions of dollars a year, and must now focus its own efforts to protect its high value customers, unfortunately at the expense of everyone else. This is clearly not the ideal scenario for Belize, but is regretfully what the Government must be expecting to happen.
Telemedia has since February 2008, repeatedly requested the Government to sit down and to discuss a way forward together. It is clearly much better to work in partnership and come to a compromise position, than to fight unnecessarily. The Government appears however not to consider this to be an acceptable approach, and has shown itself unwilling to even appoint a proper negotiating team, with authority to negotiate and an open attitude. Nevertheless, Telemedia’s door remains open.”
