Guam calling

Guam government looks to privatise the Guam Telephone Authority รป again.

The Government of Guam has issued a request for information (RFI) seeking comments on an earlier RFP it issued regarding the privatisation of the Guam Telephone Authority (GTA). The GTA is the last government owned local telecom authority in the US, all other local carriers having been privatised in the 1980sand 1990s.

The RFI comes after a previous privatisation attempt in 2001 only attracted one bidder, which according to officials at the GTA, once evaluated was found to be "non-conforming".

Guam is a US Territory 1500 miles south of Japan and east of the Philippines. It covers 212 square miles and has a population of 163,000. Average income per capita is $16,575. Most of the Island's economy is based on tourism and the US armed forces.

The Government of Guam is keen to privatise the GTA to expand the level of telecommunications services on the island. As a government agency, the GTA was restricted from doing what most normal commercial telecom firms could do, including expanding beyond local call services, entering into new business lines such as the internet and it could not promote itself. As a privatised company the GTA would be able to expand into new areas, advertise its services and make more money.

According to the GTA's website, the authority made $44.8 million in revenue in fiscal 2002 up from $44.6million in 2001. However it made a loss on that revenue of $166,000 in 2002 compared to a profit of just over $5 million in 2001.

The GTA has long-term debts of $105 million but it is understood that as part of the privatisation procedure, much of the firm's pension liabilities would be transferred back to the government. This could knock nearly $14 million from the debt pile.

The company states that its total asset value is nearly $180 million in 2002, down from $186 million in 2001.

It appears that the original RFP went largely unheeded and thus the government is now calling on interested parties to submit information as to how the process could be improved. According to the official web page of the privatisation process, potential buyers need to have net assets of $100 million and annual revenues of at least $500 million. They also need a track record in running telecoms businesses. This would suggest that a sale to a strategic buyer is preferred to a sale to a financial buyer.

Handling the sale process is US law firm Patton Boggs, which specializes in government work of this nature. Also advising the Guam government are IBM and Bearingpoint, formerly the consulting arm of KPMG. Submissions to the RFI are expected by June 16th.