REGIME CRONIES TO BAIL OUT FIJI RUGBY – VODAFONE BUILDS CONSORTIUM OF GOVERNMENT-LINKED COMPANIES AND CALLS TIME ON DIGICEL

By VICTOR LAL

A consortium of reliably regime-friendly businesses including Vodafone, Fiji Airways, C J Patel and Fijian Holdings will position themselves as national saviours this week, banding together to help improve the Fiji Rugby Union’s desperate financial situation following the suspension of more than $3m of development grant income from the International Rugby Board because of concerns about the FRU’s sustainability and governance issues.

Despite having had no chief executive since last September and no marketing manager since November 2012, the FRU’s interim CEO Dr Berlin Kafoa, in a rush to show some good news, has promised to reveal a whole slew of new sponsorship deals this Friday. But legal trouble may lie ahead for the FRU because none of the new deals involve incumbent sponsor Digicel whose expired contract gave them a right to match the last offer of their competitor.

Digicel Cup to become Vodaphone Cup

FijiLeaks has been told by reliable sources from within Vodafone that Vodafone will become the title sponsor of the national 15s team which has been without a significant sponsor since Flour Mills of Fiji cancelled their contract a year early, in 2008. There will be a joint sponsorship between Vodafone (replacing Digicel, whose contract expired last year) and Fiji Airways for the national 7s team. As part of the same Vodafone takeover, the competition formerly known as the Digicel Cup and played between the major provincial unions, will become the Vodafone Cup.

Fijian Holdings will become sponsors of the annual Island Zone and B Division competition between the minor provincial unions and the C J Patel Group will become sponsors of the national Fiji Schoolboys Under 18 team and possibly also the title sponsor of the secondary schools’ Deans Trophy competition. And the Fijian Holdings-owned company Merchant Finance has been pressed into supporting the East vs West, which was actually created by the Fiji Sports Council as a means of drawing crowds into the heavily-indebted government-owned sports complexes in Suva and Sigatoka.

It is understood that the FRU expects to be able to claim at its Friday press conference that the value will be between $5 million and $6 million per year. On paper that is at least a three-fold increase over the total of previous sponsorship deals. This chronic sponsorship weakness lead to the FRU reporting losses of $177,748 and $606,647 for 2011 and 2012 respectively when the body was chaired by land force commander Lieutenant-Colonel Mosese Tikoitoga following a ‘coup’ in January 2011 in which the Bainimarama government forced fresh board elections by saying they would help finance the 2011 Rugby World Cup but only if the elected board resigned before their terms were completed.

But all might not be as it seems.

The Vodafone consortium includes a number of companies which are notoriously risk-averse when it comes to putting up hard cash. C J Patel’s reliably pro-Bainimarama newspaper the Fiji Sun is sufficiently hard-nosed to take cash for adverts such as ‘Angel Body Massage Centre... stress n relaxation, hotel visit and discreet parking’ but, as a media partner of the FRU, they have not given a single dollar of cash. The Sun’s only contribution is in the form of free-of-charge advertising and an unappealing and mostly unread weekly rugby supplement. Likewise, in 2009 Vodafone announced to the media that the FRU had turned down a sponsorship of $27m over three years, a closer examination showed that less than $10m was actually in the form of cash. The balance was in the form of free Vodafone airtime and ‘promotional support’.

Depending on how the contracts are structured, it’s expected that the sponsorship will also be priced as VAT-inclusive, meaning that fifteen percent of the value of all of the deals will be taken by the government, to be paid to FIRCA in cash, whether the deal is a cash deal or not. With no CEO and marketing manager, the deals have been negotiated by the FRU’s marketing sub-committee – headed by deputy FRU chairman Daniel Whippy, board member and supermarket tycoon Baljeet Billy Singh of Kundan Singh, the FRU chairman Waqabaca and acting CEO Dr Berlin Kafoa from the Fiji School of Medicine.

The big loser in all of this will be Digicel, who have been the naming rights sponsors of the national 7s team since the 2005/2006 IRB 7s Series.

Vodafone have looked increasingly marginalised over the past almost nine years as Digicel has gone from strength to strength on the back of their ownership of Fiji rugby – a tactic that Digicel boss Denis O’Brien perfected with his sponsorship of West Indies cricket in the 1990s which saw him outmanoeuvre the smugly, self-satisfied equivalent of the Vodafone monopoly in the Caribbean, Cable and Wireless. Vodafone’s response to Digicel’s ownership of Fiji rugby has been by sponsoring the lesser national sports like soccer and rugby league, and to take over the June-July-August season of beauty pageants such as Miss Hibiscus.

Fiji’s rugby fans may feel that they are long overdue some good news on the sponsorship front and they may consider Vodafone’s money as good as Digicel’s. The way that Vodafone has structured its consortium is clearly designed to play to popular appeal – long overdue sponsorship of the Island Zones and minor Unions for instance - which could be popularly received.

Of interest to the wider business community and the military regime’s relationship with an increasingly skittish investment community will be the reaction of O’Brien and Digicel’s management in Fiji.

Digicel’s previous sponsorship contract gave them a matching last right of refusal; whether this was fairly executed by the FRU remains to be seen. Certainly O’Brien will feel he has not been playing on a level playing field – the Fiji National Provident Fund’s ownership of ATH, which in turn has a 51 percent stake in Vodafone Fiji, made them the government’s preferred choice as soon as permanent secretary Finance Filimone Waqabaca was elected FRU chairman in June last year. Suva’s business community has been talking about the Vodafone takeover since at least September.

It appears that to get around the awkwardness of Digicel’s right to match any last offer made by Vodafone, Vodafone may have been encouraged to build up a consortium of sponsoring companies – each with a specific piece of the FRU to sponsors - and to consolidate all of their combined interest into a single Vodafone offer to the FRU. In real estate terms, it would be rather like bidding for a single property against someone whose bid was also allowed to include the value of five other properties as well. That may have made it impossible for Digicel – who don’t appear to have reached out to form a similar consortium – to match Vodafone’s promised offer, if that offer was in the $5 million to $6 million region.

But whether that amounts to the FRU following their contractual obligations to Digicel in good-faith is something that O’Brien may feel needs to be tested in court. Or by some other display of disappointment at the FRU’s apparent rigging of the result to achieve a win for Bainimarama’s crony capitalists.