The Weighted Average Cost of Capital (WACC) is the overall cost to an organisation of obtaining investment funds, including the cost of both debt sources and equity sources. It is an average representing the expected return on all of a company's securities. Each source of capital is weighted according to its prominence in the company's capital structure.
In March 2012, the Authority contracted Analysys Mason to review Gibtelecom's WACC and benchmark it against rates adopted by other European operators. The WACC was last reviewed in 2005 and, therefore, it was the Authority's view that it should be brought into line with today's market conditions.
A draft report outlining Analysys Mason's findings was sent to Gibtelecom in June 2012 in which the company was invited to provide comments on any section of the report while paying particular attention to the recommendations concerning the various parameters which make up the WACC. Gibtelecom provided its comments which showed a general agreement with the report's conclusions. However, there were some areas in which Gibtelecom disagreed and gave their reasons for doing so.
Taking into account Gibtelecom's comments, the Authority produced a final report in which it determined the parameters which were to be included in the WACC calculation and set the nominal pre-tax WACC at 12.45%.