CMI gets online to bid for Cablelink

The issue is simple, but the solution is complex: how can Cablelink be turned around in the fastest time possible, to provide the broad range of services, such as video on demand and telephony, that it is capable of?

Over the next few months, one man who will be giving the matter much thought is Mr Ray Doyle. As chief executive of Cable Management Ireland (CMI), he and his company are the first candidates officially to declare their intentions regarding the sale of Cablelink.

CMI wants to buy Cablelink and turn it into the multimedia platform, so often spoken of by Telecom chief executive, Mr Alfie Kane. Telecom is a majority shareholder, but has been ordered to divest by the Government.

Mr Doyle will not be alone when Cablelink is put on the market, possibly in September, as the company is expected to attract huge interest from overseas companies. Among those tipped to bid are Cabletel, WorldCom and possibly Time Warner.

"There will be tremendous interest in it," says Mr Doyle. "I would regard Cablelink as one of the greatest opportunities ever to develop a cable system of the future."

Industry sources estimate the value of Cablelink at £140 million. The company will also need substantial investment to upgrade it around £120 million.

Mr Doyle is confident the company is well-positioned to bid. It has 62,000 subscribers, 28 cable and MMDS franchises around Ireland, and heavy duty backers in the form of Legal & General Assurance Company and Barings Communications. Money, he says, will not be a problem.

Mr Doyle, whose company is well-known for its services in the Swords/Malahide area, believes Cablelink offers serious potential. It has 340,000 subscribers, mainly in Dublin, Galway and Waterford and a fairly good brand name.

It has a high level of penetration in those areas both in the business and the residential markets. "At around 80 per cent in Dublin, Cablelink has one of the highest penetration rates of any cable company in the world," he says.

Mr Doyle believes a new purchaser would have no problem increasing revenues through providing more services, once the system was upgraded.

The lifting of the telecommunications derogation last week will open the residential market for switched-voice telephony at the end of this year instead of at the beginning of 2000 and has given matters an added impetus.

However, before anybody bids for the asset, Mr Doyle says there are issues which must be sorted out. They include: access to land and ducting, which is used for carrying services such as electricity and telecommunications. Mr Doyle says it is ridiculous and extremely expensive for company after company to be digging up roads to put in their own ducting to carry their services.

"The local authorities should write to everyone it believes may be interested and tell them when ducting is being put in to see whether they want to be included," he says. `They should then say they will not open up the roads for another five years."

Mr Doyle believes Cablelink is an incredibly important asset which has suffered serious under-investment by its shareholders, Telecom and RTE, and it has also been hampered because the Government did not allow it to increase its prices.

The £96 per annum which the company charges to its Dublin subscribers is at least £24 per annum behind other cable operators' fees and is far too low for the services Cablelink provides, says Mr Doyle.

The Office of the Director of Telecommunications Regulation would have to approve a price increase, according to Mr Doyle, but he says whoever buys Cablelink will have to be given some latitude on price. "Just because you are the biggest operator doesn't mean you have to be the cheapest."

Mr Doyle argues that the Government will have to lay down a strict timetable of what ugrading must be carried out, before it awards the tender. The mobile phone operators were given certain planning exemptions when installing their networks, but when the cable operator sought similar concessions they were refused, he says.

Despite the Government's ambitions, he has serious doubts that it will be able to sell Cablelink on to a new owner this year especially since to carry out due diligence on even a small cable company can take three to six months.

While which ever company wins the Cablelink franchise will have exclusivity within the areas it operates, like other cable operators in Ireland, it will still face competition from overseas. BSBSKY, for example, intends to offer 200 digital television channels.

Cable operators, including CMI are positioning themselves for competition, upgrading their own systems, moving towards digital broadcasting and improving their packages. Cablelink offers a one-off golden opportunity greatly to expand in the marketplace.

Mr Doyle, whose company launched the first two-way cable Internet service in Ireland this week, says cable companies will face increasing competition and will have to develop value-added services.

Meanwhile, CMI and other cable operators have another battle on their hands. Both CMI and Princes Holdings (in which Independent Newspapers has a stake), are suing the State over the deflectors issue. They say they were given exclusive licences and the State promised to stamp out illegal deflectors, but then did the opposite. They are suing for alleged losses incurred.

Deflectors are used to rebroadcast television programmes without a licence. It is an issue which makes Mr Doyle extremely angry. In both his capacity as chief executive of CMI and secretary of the Cable Communications Association of Ireland, he has lobbied strongly for the issue to be tackled.

Mr Doyle says illegal rebroadcasters are breaching copyright and are not subject to any regulation, technical or otherwise.

One source said this week that if Mr Doyle pursues Cablelink with the same determination as he has pursued the deflectors issue, he should be in with a fighting chance.