The Cable & Wireless Plc bid to buy KeyTech Ltd. will all come down to price, KeyTech chairman Dr. James King told some 50 shareholders at the company's annual general meeting yesterday.

In this case however the offer price ? $205 million for 100 percent of the company ? was not fair value.

"Having considered the inherent value of the group's operations, its various assets and current stock position your board is not recommending this price as being in your best interest," he said.

KeyTech is the locally owned parent company of Bermuda Telephone Company, M3 Wireless, Logic Communications, Bermuda Yellow Pages. It is also a part-owner of QuoVadis and Cablevision. The majority of its shareholders are Bermudians who are long-term investors. As such, Dr. King said the value of their investment has grown over time through cash dividend returns. These have increased annually for the past five years. This week KeyTech also offered a 1 for 10 share dividend.

The Cable and Wireless offer amounts to $17 per share based on 2.1 million shares this week or $15.45 per share for each of the 13.2 million common shares that will exist after the share dividend.

"As KeyTech is majority Bermudian owned, these dividends predictably flow back into the hands of Bermudians," he said.

The "peculiar" decision by Cable and Wireless' to go public on the offer this week, without the knowledge of KeyTech, was likely the result of frustration and a desire to put public pressure on the regulatory bodies and shareholders, he told shareholders.

KeyTech's directors have considered various proposals from Cable and Wireless over a period of some months and when Cable and Wireless announced its offer last week, KeyTech's directors immediately objected, deeming it not in the best interest of the shareholders.

"I imagine they will come back with a counter offer," Dr. King said adding that the board would not hesitate to inform shareholders if it perceived an offer to be "fair value".

The directors have no plans to recommend a course of action. Shareholders will be left to make their own decision on whether to sell or not.

"It has to be decided by you and only you," said Dr. King.

The only way Cable and Wireless can acquire KeyTech is by offering a price that appeals to two-thirds of the shareholders.

Earlier in the day, Cable & Wireless PLC repeated its interest in acquiring KeyTech Ltd. at its own annual general meeting in London.

International Group managing director Harris Jones told reporters the company hoped pressure from KeyTech shareholders would push through acceptance of the proposal.

"I do not profess to understand why it is not in the holders' interest to accept the approach. I suspect that it is an untenable position for the company but I would hope not to go hostile," Mr. Jones said.

A KeyTech shareholder asked Dr. King whether there was a way to protect the company against a hostile take-over.

"The term 'hostile take-over' has many meanings," said Dr. King. "In this regard your company did not seek an acquirer. Someone looked at us and decided it should be a 'must have'."

He continued: "Our view is that everything is possible and there is one single issue at the end of the day and that is price."

There are however plenty of issues related to the Cable and Wireless proposal besides price. For one, the company would have to get past Bermuda's 60/40 ownership restriction. The Ministry of Telecommunications would also have to grant approval, but former Minister of Telecommunications Minister Ren?ee Webb set in place a policy against allowing Class B carriers to be more than 60 percent owned by foreigners. "Class B" is a Telecommunication Act designation which refers to local wireless telephone service providers as opposed to international service providers. BTC and M3 Wireless are both Class B carriers.

Dr. King told shareholders yesterday that while he was aware that Cable and Wireless had held discussions with the regulatory bodies, to his knowledge, there had been no blessing for them to acquire KeyTech.

The Royal Gazette e-mailed questions to the Bermuda Monetary Authority on Friday, but by press time there was no response.

On behalf of members of a retirement community, another shareholder asked whether retirement and health benefits would be held as always.

Dr. King said that as long as the current management and directors were in place everything would be done to protect and recognise the value of the commitments the company had made.

"After me, I can but advise. It is certainly not the current management's view to do anything other than respect and value the contract we have," he said.

Although the crowd was much larger than normally attends a KeyTech annual general meeting, one shareholder said it was surprising how docile everyone was and how few people actually asked questions.

One shareholder exiting the meeting told The Royal Gazette that he was in limbo.

"I have to go home and do my homework now," he said.

Others were concerned about whether the sale would be good for Bermuda.

"I hate to see another large Bermuda company fall to an outside group," shareholder William Zuill Senior said after the meeting.

"You can take any price, $100 or $1,000 [per share], but that doesn't mean the community will be better served," said another. He added that it did not appear that any shareholders present at the AGM were prepared yet to consider an offer.

"There is not enough information and certainly the value being offered at the moment is way out of whack," he said.

Many other shareholders said they did not have enough information to comment on the deal at all. For one thing, shareholders do not have a clear picture of KeyTech's assets.

That picture may become clearer picture next week however when KeyTech circulates a letter to shareholders to give them more information about the company.

Cable & Wireless's bid for KeyTech is entwined with its plan to grow internationally ? as growth at home is constrained by increased competition and falling demand for traditional voice services.

The reorganisation of Cable & Wireless "is already bearing fruit and, on the basis of the first quarter of the new financial year, we are comfortably in line with plan," chairman Richard Lapthorne said in a Regulatory News Service statement before the company's annual meeting.