Business Page July 18, 2004

 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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