ComReg willing to license Smart after deadline

State communications regulator, ComReg, was willing to issue a mobile licence to Smart Telecom several days after the deadline for granting it had passed, the High Court heard yesterday.

Last November, Smart successfully tendered for a third-generation (3G) mobile licence, beating off competition from Eircom and its subsidiary, Meteor. ComReg withdrew the offer of the licence last February because it says Smart failed to provide it with performance guarantees by an agreed deadline of January 30th.

Smart is seeking a declaration from the High Court that the regulator is contractually obliged to issue it with the licence. It says that it provided ComReg with draft guarantees by January 30th.

In the High Court yesterday, Smart's head of regulation, Iarla Flynn, gave details of a meeting on February 2nd between the company and ComReg, whose representatives included its chairwoman, Isolde Goggin, commissioner John Doherty and staff member, Jim Connolly.

Smart chief executive, Oisín Fanning, head of operations Ciarán Casey and Mr Flynn represented the company.

Mr Flynn said that at the meeting, Mr Connolly stated that ComReg still wanted to give Smart the licence. The differences between the company and the regulator were down to conditions contained in the draft bonds. ComReg said these conditions were not acceptable as Smart had not included them in its original tender for the licence.

The bonds were guarantees that Smart would pay financial penalties of up to €100 million if it failed to meet agreed milestones in creating its network.

Smart gave ComReg three draft bonds, which were not finally approved by the banks involved. One was from Smart, and was to be underwritten by Ulster Bank. The others were from BT and technology company Huawei, who were to build the network and supply the technology, with Royal Bank of Scotland and Independent Commerce Bank of China underwriting the respective guarantees.

The drafts included clauses declaring the penalties would not be paid if Smart became insolvent, if the licence was revoked, or if there were a dispute between Smart and its suppliers.

ComReg objected to these terms. Mr Flynn told the court yesterday that the term relating to disputes between Smart and its suppliers could have been eliminated if the company and the regulator had agreed a measuring system to ensure that Smart met its targets.

The regulator told the company that it would have to come up with the measuring system and present it to ComReg. Mr Flynn began working on that following the meeting.

According to Mr Flynn, differences emerged between the two sides over the exact purpose of the bonds. He said Smart regarded them as guarantees that the company would meet its targets. However, ComReg viewed them as a means of compensating the State should the firm be wound up or if the licence were revoked subsequent to being issued.

Ms Goggin asked Smart's representatives how long it would take for Smart to deal with the issues. Mr Flynn said that Mr Casey told her three to four days.

He submitted the company's measuring and monitoring proposals on February 9th. However, when he spoke to Mr Connolly about this, Mr Connolly said he had been legally advised not to discuss the matter with the company. ComReg withdrew its licence offer on February 13th.

The case continues today.