Business

Paulwell: No sign of Digicel moving headquarters overseas

BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com

Thursday, February 27, 2014    

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MINISTER of Science, Technology, Energy and Mining (STEM) Phillip Paulwell says that the Government is unaware of any intention by telecoms giant Digicel to relocate its headquarters from Jamaica.

"They came here as a small enterprise, and now they are a multinational company operating from their base here in Jamaica, and based on the plans they have revealed to me, they intend to stay here and to grow even further," Paulwell told the House of Representatives on Tuesday in response to questions from Dr Andrew Wheatly, the Opposition spokesman on science, ICT and digital society development and the environment.

"Digicel continues to be a highly successful company...and we are proud of their achievements," Paulwell added.

Dr Wheatley had asked the minister if he was aware that, under the Urban Renewal (Tax Relief) Act, Digicel — the largest telecommunications provider in Jamaica — was an approved developer pursuant to which the company constructed its corporate headquarters in downtown Kingston, Jamaica.

The Opposition spokesman also asked the minister if he was aware that the company obtained incentives, including tax relief, under that programme and whether he knew if since the construction and occupation of its headquarters building, Digicel has been relocating a significant number of its executives outside of Jamaica.

Paulwell said that he was aware that Digicel is an approved developer under the Urban renewal ACT. However, he was not aware of Digicel relocating a significant number of executives outside of Jamaica.

Wheatley noted that last December, Moody's Investors Service's observed that while Digicel continues to have strong geographic diversification that is mitigated by its exposure to Jamaica (about 14 per cent of its total revenue), "which is struggling to revive its economy and experiencing competitive telecom pricing, following the implementation of a new regulatory and tax scheme designed to increase government receipts".

Moody's had also noted that slowing subscriber growth, lower pricing plans and adverse foreign currency movements relative to the US dollar in Digicel's three largest geographies, (Jamaica, Haiti and Papua New Guinea) accounting for over 45 per cent of revenue, have resulted in flat year-over-year revenue growth for the six months ended September 2013.

He questioned whether this was not a disincentive for Digicel continuing to house its global headquarters in Kingston.

But, Paulwell noted that Fitch, which, along with Standard & Poor's and Moodys are considered the "big three" credit rating agencies, upgraded Jamaica's credit status on Tuesday.

He said that the period for analysing the benefits accruing from the incentives granted to Digicel under the Urban Renewal Tax Relief Act, which was passed in 1995 to encourage and facilitate development within urban areas suffering from blight, decay and dilapidation, starts on March 31.

Paulwell said that the country would have to await that process before assessing whether or not there has been fulfillment of the undertakings that were given relative to the benefits.

"At that time, the minister (of finance and planning) will be able to advise us as to whether or not the promises have been fulfilled, and the company is operating accordingly. (But) We have seen documentation, for example, that explains what was meant by this headquarters, and I think that they will rationalize that when the time comes," Paulwell said.

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