SBPost: Eircom said no to E1.8bn state deal

dahamsta

Great interview, and great to see Murphy so bullish on the whole subject. He couldn't commit fully to it though, had to use the term "challenge industry" for "give us some feckin money like". Old habits die hard I guess.

Keep it up Bill. Get nasty.

adam

spongebob

damien.m wrote:

Interview continued:
BILL MURPHY
I suspect what has to be done now can be done for a couple of €100 million Euros or less.

Universal (or thereabouts )

Muck wrote:

Eircom have also set a price of €100k or so for DSL enabling an exchange. There are 900 outstanding or €90m

All exchanges DSL enabled only and technically equipped to supply 5mbits (the Government plan) up to about 3km using ADSL2+ ......and up to 512k at up to 5km - 6km on Eircoms wiring.

€1.8Bn me arse

M

jwt

Can someone explain to me why Eircom would throw 1.8bn in cash, tax breaks etc. away in order to realise 450mn in dividends?


I can see the short term cash grab opportunity, even director bonuses but in the medium term the Gov offer would have solved most ot Eircom's debt and cash flow problems in one fell swoop.

Or is my class 101 accountancy lesson leading me astray?

And has SBP given any indication who new about this? i.e. Cabinet level, ComReg, opposition, Director of consumer affairs, Europe?


John

SkepticOne

jwt wrote:

I can see the short term cash grab opportunity, even director bonuses but in the medium term the Gov offer would have solved most ot Eircom's debt and cash flow problems in one fell swoop.

It would probably have been structured in phases and Eircom would have had to contribute towards the total investment. I think the phrase used was Government contracted Eircom investment. The full details may never emerge as DCMNR used the cover of cabinet confidentiality (handy that) to hide them. The journo on the radio who recieved the leaked documents wasn't clear on the exact nature of the details so we may never know.

I'd like to know whether some of the Government's side of things was delivered but Eircom renagued ("it was never in writing") and this is why it is being leaked now.

MarVeL

The 450m went to the shareholders right away whereas the 1.8bn would only eventually (if at all) have filtered down to them.

damien

From today's Irish Times:

Dempsey rejects charge of €1.8bn incentive for Eircom
Mark Hennessy, Political Correspondent

The Government has sharply rejected charges that it offered a preferential €1.8 billion deal to Eircom to speed up the supply of high-speed broadband internet services.

In a written Dail reply yesterday, the Minister for Communications, Marine and Natural Resources, Mr Noel Dempsey, told Fine Gael TD, Mr Bernard Durkan: "These claims are untrue." The Sunday Business Post has alleged that Eircom had been offered a range of incentives such as tax breaks, subsidized loans, building regulation changes and price increases.

"At no stage were negotiations entered into with Eircom or any other party. At no stage were terms such as postulated in the Sunday Business Post article on offer nor did the Government offer to fund Eircom directly or indirectly through subsidised loans, tax breaks or any other means. This has also been publicly confirmed by Eircom," said the Minister.

Both Eircom and Esat BT held discussions with a Government-appointed consultant, Mr Ira Magaziner, about ways of accelerating the sluggish roll-out of the broadband network.

Mr Magaziner's company, SJS, reported to the Cabinet in May 2003 after consultations within the industry and with the Department of Communications, Marine and Natural Resources, headed by the then minister, Mr Dermot Ahern.

The consultants claimed that Ireland could be among the world leaders in broadband within three years with the help of certain incentives and financial assistance.

In his Dail reply, Mr Dempsey said consultants' advice to "a Government subcommittee, agency or a Department should not be misconstrued as Government policy. The telecommunications market is a regulated market and thus any action by Government has to be consonant with national and EU regulation. Accordingly, Government is not in the business of entering exclusive contracts of the kind inferred by the article with any market entities," he said.

dahamsta

The Business Post shouldn't let this lie. If they really have evidence, they should publish it, Cabinet confidentiality or not; the person that leaked it to them knew the risks. If the leak was malicious towards the Post, then they need to be outed. It's black and white to me.

adam

damien

A badly scanned in copy of Noel Dempsey's answer is available from here (1mb PDF)

Eurorunner

07/11/04 00:00

By Pat Leahy Political Reporter
Opposition politicians repeatedly questioned the government in the Dáil last week about what deals it was prepared to do to secure a broadband agreement worth E1.8 billion with Eircom in the summer of 2003.
Eircom has denied a story publishedin lastweek's Sunday Business Post which cited cabinet documents revealing proposals to offer Eircom significant incentives - or "carrots'' - to secure a deal. "Eircom did not walk away from any discussions with the government," said an Eircom spokesman, although he acknowledged discussions had taken place. "The thrust of the story doesn't reflect what happened."

In answer to a parliamentary question last Thursday, theMinister for Communications Noel Dempsey, said that while "discussions'' had taken place with Eircom, no "negotiations'' had taken place. No "offers''were made to Eircom, he said.

Eircom refused to say if it had contacted the minister at any stage last week.

The Sunday Business Post understands that Eircom contacted the department last Monday and that the chief executive, PhilipNolan, spoke to the minister by phone last Wednesday. There was also a prearranged meeting with the minister last Thursday, at which the matter was briefly discussed. The documents presented to the cabinet sub-committee specifically show that the talks had not reached a formal, contractual, legal stage. They do, however, reveal a degree of detail and involvement in the talks between Eircom and the government on the subject of a new departure for broadband in the period beforeMay 2003. Headed "The Eircom Discussions'', they state: "The Eircom discussions focused on two issues: what would be the best way to upgrade the Eircom local network to meet the government's broadband objectives. . . and how much would it cost to doso?

"How can the government and Eircom structure a new company or an appropriate contract between themselves to ensure that these investments get made and the objectives are accomplished in a timely fashion?" The documents go onto say: "TheDepartment of Communications, Eircomand SJS [the US consultancy firm which is led by Ira Magaziner] examined three di f ferent approaches to achieve these goals and one approach that achieved lower goals. These options ranged in cost from E900millionto over E4 billion. "Al l three groups have agreed that the best solution is the one that will cost E1.8 billion over 5 years. SJS, the Department of Communications and Eircom discussed two models for structuring the broadband local network: a new company that would pool assets [or] an Eircom investment made in accordance with a government-negotiated contract."

The documents go onto say: "The department has made a decision to proceed with attempting the Eircom alternative first." The report to the cabinet specifically envisages that agreeing a contract between Eircom and the government for rolling out broadband will be "a complicated and difficult negotiation'' which "should have a 3 to 4 month deadline that is strictly enforced." Both sides had reached the stage of negotiations where formal contractual discussions were ready to start. Shortly after that, the talks, in the words of an Eircom executive, "petered out''.

SkepticOne

I'd still love to know what Eircom were supposed as their side of this arrangement.

Moriarty

Yeah, I've been wondering about that too. 1.8bn seems like far too much just to get exchanges upgraded.. so was there meant to be an investment in repairing the access network.. or was there meant to be limited ftth/c rollout.. or what.