Company accuses ComReg of moving the goalposts

Smart's argument: Smart Telecom said in the High Court yesterday that it believed the communications regulator ComReg moved the goalposts at what should have been the final stage of granting the company a mobile network licence.

Last November, ComReg announced that Smart Telecom had succeeded in winning the tender for the final third generation (3G) mobile licence in the Republic.

It offered the licence to Smart subject to certain conditions. As well as €56.7 million in fees, Smart had to put in place a €100 million bond guaranteeing it would meet performance targets.

This involved promising that its network would reach certain proportions of the population by certain deadlines. For example, it had to cover 22 per cent of the population by its scheduled launch in July. If it failed to meet any of these targets, it forfeited part of the bond. If it failed to meet all of them, it would lose the entire €100 million.

Three banks are underwriting the bond for Smart. In other words, in return for a premium, understood to be about €1 million, they have promised to pay ComReg the money if Smart fails to meet its targets. The company would then repay the banks.

The three pledges were given to ComReg on January 27th, three days before the deadline of January 30th. They were draft guarantees obliging the banks to pay the money. Smart understood these drafts would be acceptable to the regulator.

Outlining the company's case yesterday, Michael Cush SC said the drafts and guarantees matched a template given to the company by the regulator.

But over the weekend between January 27th and 30th, the regulator told the company that it had a number of concerns in relation to the bonds. ComReg said the guarantees were not in an "acceptable form" and not "fit for purpose". It also said the January 30th deadline was absolute.

Smart told the regulator it was confident it could sort out any problems, but pointed out that the regulator was raising these issues over a weekend.

In addition, one of its banks was Chinese, and was closed for several days to mark Chinese New Year.

When the deadline came, Smart asked for assurances about the licence offer and threatened to take legal action if these were not forthcoming. ComReg asked Smart not to go to court, to allow both parties to talk between February 2nd and 10th. However, Smart said yesterday that ComReg would not engage in any "meaningful consultation" between those dates.

On Friday, February 10th, Smart said it would agree to the appointment of an independent party to settle the issue. However, ComReg withdrew the licence offer late on Monday.

ComReg's argument has yet to be heard. It is possible that it will outline its position in the High Court tomorrow.