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CWJ shareholder takes grouse to court

BY KARENA BENNETT
Business reporter
bennettk@jamaicaobserver.com

Wednesday, January 03, 2018

A shareholder of Cable & Wireless Jamaica Limited (CWJ), Eric Jason Abrahams, has filed an application in the Supreme Court here against the telecoms giant, requesting permission to bring what is known as a derivative action in a court in Florida, USA, in name of and on behalf of CWJ against its parent company, as well as some of CWJ's past, present and shadow directors.

News of the application was posted on the Jamaica Stock Exchange website late yesterday afternoon.

It is understood that Abrahams, who is also managing director of Deutsche Bank Securities, hopes to reclaim US$500 million in assets to return to the Jamaican business which should bolster CWJ's financial position.

According to the statement on the stock exchange website, Abrahams has charged that losses sustained by CWJ were caused by the directors who he alleged were acting in breach of their fiduciary duties, for the sole benefit of the parent company.

On Friday, Liberty Global opened an offer of $1.45 per share to acquire all minority shareholding in the listed local entity. The offer closes on January 31. The international telecoms firm aims to acquire three billion CWJ shares, through CWC Cala Holding Limited. CWC Cala and affiliate Kelfenora Limited together hold 82 per cent of CWJ, which trades as FLOW Jamaica.

Minority owners of CWJ stock have been lobbying for Liberty to make them an offer, after the company fully acquired CWJ's former ultimate owner, Cable & Wireless Communications Plc, in 2016.

According to the statement, Abrahams' complaints mainly concern the significant losses sustained by CWJ as a result of the lack of regulation for a protracted period of new entrants into the mobile market in the telecoms industry after liberalisation.

The statement added that the parent company had extended financial support to CWJ by way of loans which enabled CWJ to “weather that stormy period” while CWJ fought to ensure that a level playing field in the mobile market was implemented, which then resulted in a reversal of the previous trend and improvement in CWJ's revenues.

“CWJ therefore intends to vigorously oppose the application when it comes on for hearing on the 19th of April, 2018,” the statement outlined.

For the financial year ended 2016, CWJ posted profit of $1.165 million over losses of $8.889 million a year earlier. Group revenue stood at $23 million ahead of the $21.8 million it posted in 2015.

The positive year-end results were led by 83 per cent decline in operating costs and other operating income and expenses including directors' and key management remuneration which saw the group moving from a deficit of $6.952 million in 2015 to $1.135 million in 2016.