Cellular One chief operating officer Michael Leverock says that the BMA's rejection of a deal to sell Cellular One's parent company to US Virgin Island-based Atlantic Tele-Network has major implications for local companies trying to raise capital.

He accused the authorities of moving the goalposts: "Government need to be sure that they let the players know what the rules are and if there is going to be change of policy, some consultation with industry is probably the way to go."

Mr. Leverock said that local companies, particularly telecommunications companies, have no choice other than to pursue foreign investment:

"If Bermudians don't come to the wicket and put up the capital, we have to get it from somewhere."

Investment from companies such as Atlantic Tele-Network (ATN) is essential because of the large start-up costs such as building networks and systems.

"We had two rounds of private placing in getting this company up and running, in both cases we found that we could not raise the finance locally and the primary reason was that people were not prepared to take the risk.

The banks here are not investment bankers and neither do they appear to be particularly interested in venture capital projects.

"If companies can't find venture capital here, they need to go overseas and if we don't have the proper fiscal infrastructure in place to accommodate that, its not conducive to encouraging future business opportunities."

The whole story goes back to 1994 when Bermuda Digital Communication and Cellular One were formed.

Four years later in 1998 and Atlantic Tele-Network got involved as a minority shareholder. "Subsequent to that there was a another round of financing and ATN were given the opportunity to participate but prior to that there was the need for a 114b licence which we applied for and we got."

At that time, Mr. Leverock and the other owners of BDC were under the impression that the 114b licence granted by the Government contained no restrictions.

It was always part of their long term strategy, said Mr. Leverock, that they would need further financing in the future in order to keep up with developments in the industry and advances in technology.

"We did not know about the 60 per cent maximum foreign ownership policy until after the fact."

It now transpires that the ministry of telecommunications has introduced a firm policy on this issue, but during the 114b application process, Government never made mention of the fact that a total take-over by a foreign investor was out of the question.

"It does not put Bermuda in a good light on the one hand to say you want to encourage foreign investment but on the other hand not to allow those who make the investment to participate and fully realise their investment," said Mr. Leverock.

It is also unfortunate for those local shareholders who did step up to the plate and take the risk, that they are now being denied the opportunity to realise their investment.

Mr. Leverock said that BDC is not alone on this issue: "Other telecoms have told me that the level of foreign ownership is also an issue for them."

According to Mr. Leverock, had the ATN deal gone through, it is highly likely that it would eventually have taken BDC and Cellular One public.

He said that this is the usual exit route for this kind of capital: "I have no doubt that ATN would have one day floated the company through a public offering."

As for whether Cellular One would now consider listing on the Bermuda stock exchange, Mr. Leverock says: " Listing is the alternative, but one of the things that concerns us is the liquidity of the BSX. Another issue is valuation of the telecom stocks.

"There are certain valuation models which are used to value cellular properties and I'm not certain whether listing on the exchange would help us to realise the full benefit of equity growth."

While many would argue against 100 percent foreign ownership of Bermuda's second largest cellular phone company, Mr. Leverock said that the deal would have had plenty of "spin off benefits".

"Other than the fact that us shareholders would have used the money to fund other economic growth in Bermuda, it would have helped to ensure the longevity of the company and that actually helps to ensure continued employment of Bermudians and also helps to ensure continued development of Bermuda's infrastructure." He said now that the Atlantic Tele-Network deal had fallen through, the implications for him personally were that he could not invest in various other Bermuda opportunities.

"There were a handful of projects which I had planned to invest in," says Mr. Leverock, disclosing that these were new projects outside the telecommunications area which he is no longer in a position to support.

Asked whether this experience will make him choose to invest overseas, Mr. Leverock says: "Not ideally, but I don't want to put myself in the position again where I cannot realise my investments."