Has BTL breached the Telecommunications Act yet?

"A licensee shall not enter into or give effect to any agreement, arrangement or understanding which has the purpose or has, or is likely to have, the effect of significantly lessening competition in any market for the supply of telecommunication services or of any product used in connection with telecommunication services." — Section 42(4), Belize Telecommunications Act.

The approval by Belize Telemedia Limited's (BTL) Board of Directors this week of a proposed acquisition of Speednet Communications Ltd. (SMART) has sparked public debate over whether the transaction is permissible under Belize's Telecommunications Act. However, based on the information currently in the public domain, the more immediate legal question is not whether the acquisition itself is lawful, but whether BTL has reached the stage contemplated by Section 42(4) of the Act.

BOARD APPROVAL VERSUS A COMPLETED AGREEMENT

In a press release issued on August 4, BTL announced that its Board had approved the proposed purchase of 100 percent of Speednet's issued share capital. The company also stated that the approval remains subject to the satisfactory completion of continued due diligence and the negotiation of appropriate representations, warranties and other contractual protections.

BTL further stated that once negotiations advance to the definitive agreement stage, the Share Purchase Agreement will be submitted to the Board for separate review and final approval before execution.

That sequence is significant because it indicates that, according to BTL's own statement, no definitive Share Purchase Agreement had yet been executed when the announcement was made.

WHAT DOES SECTION 42 PROHIBIT?

Section 42(4) prohibits a licensee from entering into or giving effect to an agreement, arrangement or understanding that has, or is likely to have, the effect of significantly lessening competition.

The provision does not expressly prohibit a company's board from authorizing negotiations or approving the pursuit of a proposed acquisition in principle.

Consequently, based solely on the information publicly released by BTL, the company's Board resolution does not necessarily constitute the agreement contemplated by Section 42(4).

Whether that threshold has been crossed depends on facts that are not presently public, including whether BTL and Speednet have entered into any agreement, arrangement or understanding beyond the negotiations described in BTL's own statement.

THE ROLE OF THE PUBLIC UTILITIES COMMISSION

Even if the parties ultimately agree on the terms of the acquisition, the Telecommunications Act establishes a separate regulatory process before the transaction may proceed.

Section 19 of the Act requires prior written approval from the Public Utilities Commission (PUC) before a licensee may transfer or assign its licence, cede operational control, merge with another person or licensee, or participate in a takeover.

The Act also empowers the PUC to refuse such approval if it determines that the proposed transaction would frustrate the objects of the Act.

Those objects include promoting reliable and affordable telecommunications services, fostering increased reliance on market forces, encouraging investment and innovation, ensuring fair pricing, promoting stability within the telecommunications sector and protecting the interests of users, service providers and consumers.

Accordingly, the PUC's role extends beyond simply processing an application. It must determine whether the proposed transaction satisfies the statutory framework established by Parliament.

THE COMPETITIONPROVISIONS

Part VI of the Telecommunications Act addresses market dominance and consumer protection.

In addition to prohibiting agreements that significantly lessen competition, Section 42 also provides that a dominant operator shall not take advantage of its market power with a view to:

• eliminating or substantially damaging another licensee;

• preventing another person from entering the market; or

• deterring another licensee from engaging in competitive conduct.

The Act further provides that the PUC may determine whether a service provider is dominant by considering factors including market share, pricing power, technology, market trends and other relevant matters.

BTL'S PUBLIC POSITION

BTL's August 4 press release focuses primarily on the anticipated benefits of the proposed acquisition.

According to the company, the transaction would reduce duplication of telecommunications infrastructure, strengthen network reliability, accelerate digital inclusion, expand connectivity to underserved communities and improve shareholder returns. BTL also stated that the purchase would not require borrowing by the company or additional investment from the Social Security Board, and that the estimated BZ$80 million investment would be repaid from Speednet's operating cash flows over approximately 4.2 years.

The release concludes by stating that BTL remains committed to working with the Government of Belize, the PUC and other stakeholders to ensure that the proposed transaction is implemented transparently and responsibly.

THE LEGAL QUESTION THAT REMAINS

Based on the information presently available, BTL's own announcement indicates that negotiations are continuing and that a definitive Share Purchase Agreement remains subject to further Board approval before execution.

The legal question, therefore, does not presently appear to be whether BTL has already completed a transaction prohibited by Section 42(4). Rather, the next stage of the process will likely involve both the completion of any agreement between the parties and the statutory approval process before the Public Utilities Commission under Section 19 of the Telecommunications Act.