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Guyana
Telephone & Telegraph Company Limited - a lumbering giant
Final Part
Introduction
Today's
column concludes the series on GT&T which appeared in the Sunday Stabroek of
May 23 and 30 and
June 20,
2004.
GT&T is the story and legacy of the privatization programme of the PNCR; the
inconsistency of its successor both as a shareholder and guardian of the
national interest; a company that has used its might and influence to pursue
the sole objective of profit maximisation; a court system whose defects have
been seriously exposed such as its failure to deliver its ruling on the
issue (of the regulator's payment to the PUC), concluded over two years ago;
and a public that has become worn down by its failure to bring about any
significant change in the conduct of the company after a decade of sustained
efforts.
It
should not be a surprise that the company did nothing to facilitate this
series, even after requesting and being provided with a number of written
questions which it then proceeded to ignore. Coming on the heels of similar
refusal of Banks DIH and DDL, two other corporate giants, this only serves
to confirm the backward culture of accountability and governance pervasive
in our private sector. What was more surprising, shocking and unbelievable
was the conduct of the Public Utilities Commission in its refusal to provide
any information in clear breach of its obligation under the PUC Act. It is
in this atmosphere that
Guyana's
most successful company with a monopoly that extends for close to thirty
years, operates.
A gem of innocence or artful dodger?
On June
14, I asked the PUC in writing whether: (1) It had made any rules under
section 48 of the PUC Act regarding the 'the forms of all books, form of
accounts, papers and other records required to be kept by every public
utility and requiring every public utility to 'keep and render its books,
accounts, papers and other records accurately and faithfully in accordance
with internationally accepted accounting principles in Guyana in the form
and manner so prescribed by the Commission, and (to) comply with all
directions of the Commission relating to such books, accounts, papers and
other records;
(2) the
company is in compliance with Condition 20.2 (c) of its Licence requiring it
to "procure in respect of each of those accounting statements prepared in
respect of a complete financial year of the Licensee a report by the
Licensee's Auditor stating whether in his opinion that statement is adequate
for the purposes of this condition (i.e. relating to separate accounting);
and
(3)
whether the PUC was in receipt of a copy of each of the accounting
statements and of the reports relating thereto ......required under 20.2 (d)
of the Licence to be delivered 'to the Director as soon as reasonably
practicable and in any event not later than six months after the end of the
period to which they relate'
The
response from the PUC was a gem of innocence or clever evasiveness. Here is
what they said: 'The Commission relies on the integrity of the Auditing
profession and those of its members who certify the audited financial
statements of the utilities. To date we have not had cause to question or
doubt any audited financial statements submitted by the utilities.' Perhaps
because of this misplaced confidence the Commission states categorically
that it 'has not undertaken any accounting audit of any public utility'. Has
the PUC been reading the press, including exhaustive comments and criticisms
by persons knowledgeable with regulatory and accounting matters? Does the
PUC have any idea about the objectives of a statutory audit and its
limitations for regulatory purposes? Or that following the demise of Enron
and Arthur Andersen, surveys in the USA show that the accounting profession
is now ranked just ahead of used-car salesmen and the legal profession when
it comes to matters of integrity and professionalism.
And as
far as Section 20 of the Licence is concerned, all the PUC was prepared to
say was 'The licence was granted under the provisions of the
Telecommunications Act. Our understanding of section 20 is that the Director
of Telecommunication is the appropriate authority to deal with the
accounting statements of the utility.' Story done! In other words, do not
ask us - go to the non-existent Director of Telecommunica-tion. Does the
Commission not have the presence of mind, courage or authority to ask for a
copy? Has it advised the Prime Minister who is responsible for the
Telecommunications Act that this key requirement of the Licence has been
rendered inoperable because of governmental inaction?
But
there is even more absurdity from the PUC. BP of May 20 had referred to the
temporary closure to the public of the Deeds Registry and the consequent
inaccessibility to the records lodged there. On June 3, I wrote the PUC
asking to be advised among other things of the deadline for GT&T's filing of
its 2003 return and for a copy thereof. This particular request was repeated
in June 14 and June 22 in which I also specifically quoted Section 83 (5) of
the PUC Act giving the public the right of access to information subject to
the requirement to protect confidentiality which surely does not apply to
annual returns. The PUC's answer on June 28: 'We are not aware that the
office of the Registrar of Companies is temporarily closed to the public'
Again, story done. In other words forget section 83 and right of access.
Changing roles
In Part
2 of this series, I had expressed surprise that the court would have
prevented the tax authorities from undertaking a revenue audit. I later
learnt that the court was persuaded that the audit might have been
compromised and politically motivated by statements made by then Minister of
Trade Shree Chand. While this puts the decision in a more reasonable light,
it raises the question as to why the Revenue Authority (RA) has not moved to
have a (non-political) revenue audit done since that ruling was handed down.
It is frightening if the RA's failure to act reflects any loss of confidence
in its own mandate and capacity, its ability to operate independently and
within the law or its ability to win the legal arguments in the court.
GT&T is
fully aware of and exploits the weaknesses in the regulatory mechanisms,
including the Registrar of Companies, and the company's commanding role in
the society. It understands the psychology of power and the voice of money
which it uses to considerable effect for itself. It knows that its
advertising dollar sustains many sections of the media. However
disappointing this may be to any purist concerned about the public interest,
this is how businesses operate and why effective regulation is so vital. In
a recent memorandum to the PUC, MP Sheila Holder argued that the PUC ought
to remove Utility Providers' legal expenses as a cost to be borne by
rate-payers or consumers on the grounds that utilities hire the gamut of
prominent high-priced lawyers with the objective of locking in their
services, paying huge legal bills often to frustrate PUC regulatory actions
and enhance monopoly powers without any benefit to rate-payers.
Strategic Relationships
The
accounts show that the company is proposing to pay dividends of $3.4Bn,
representing 106% of the year's after-tax income of which the government
gets $675Mn., which no doubt it badly needs. With only ATN-appointed
directors on the Board, the minority shareholders (the Government) have no
say in the decision on dividends or anything else including the insistence
by the company to continue paying unjustifiable management fees in 2003
amounting to $851Mn. before dividends. Is the non-appointment of its two
nominees by the Government mere inertia or a vote of confidence in the way
ATN runs the company?
Gaskin for director
Since
the series began, there has been no indication of any progress on the
negotiations between the Government and the company with a view to bringing
the monopoly to an end and it must be hard for consumers to accept that for
the next thirty years the status quo will remain. There is a body of opinion
and indeed a legal challenge by a consumer that holds that the GT&T
Agreement violates the law as being 'utterly void'. Is this an
oversimplification and wishful thinking on the part of consumer bodies and
competitors and can there still be a technological or commercial case for a
monopoly in this age of openness and competition?
It is
clear that many of the institutions charged with the responsibility of
protecting the consumer from any excesses by GT&T are highly inadequate. The
courts have to recognise the importance of the public interest and can
hardly justify the inordinate delay to rule on the annual fee payable to the
PUC. Its failure to conclude on certain other critical matters referred to
in this series may be costing the consumer enormous sums and the country
significant opportunities for development. Is
Guyana
an exception to the universal principle that competition is good for
consumers and the economy?
From all
appearances and his public pronouncements, President Jagdeo is not happy
with the existing arrangements and the continued exploitation by the company
of its monopoly situation. But the President needs to match his
dissatisfaction with effective action. For a start he should immediately
appoint a Director of Telecommunications or find legal ways to ensure that
the functions are carried out. In more than half-seriousness I have
suggested that Ramon Gaskin be appointed to GT&T's Board. Will GT&T then
tell the Government that it does not accept their nomination?
The PUC
As this
column has shown the PUC has become increasingly toothless and timid,
qualities that guarantee failure. It needs to robustly enforce its mandate
and immediately begin action to put an end to the monopoly which GT&T has
effectively awarded itself in the area of cellular telephone service which
its Licence surely does not give it (editor's note: it would seem that a
settlement with Cel*Star Guyana is imminent). Even if GT&T is permitted to
offer such a service, it should be done through a separate subsidiary on
conditions that are available to any similar competitor.
It needs
to relieve itself of the misconception about the accounting profession and
to understand the significant differences between a statutory and a
regulatory audit and to commission a regulator's independent audit of the
financial operations of the company. It must be aware by now that the
audited financial statements presented by the company fall short of
acceptable accounting standards and the requirements of the licence and the
PUC Act. It should not leave the responsibility of being the watchdog of GT&T
on any consumers' group or any individuals all of whom have even less
resources.
Conclusion
The
comments received from ordinary members of the public on this series have
more than compensated for the challenge involved in trying to obtain
information which should be available as a matter of right. GT&T is an
opportunity for the country to move into the 21st century. It has to begin
with equitable application of the law to the small entrepreneur as well as
the corporate behemoth. The Government must do more to protect the public
interest including its 20% stake in the company. What does sovereignty mean
if we are reluctant to enforce the country's laws?
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