ANALYSIS:INM's counter-attack this week shows it expects more fireworks from Denis O'Brien.

THE CIRCULATION by Independent News & Media (INM) of 18 "questions" for Denis O'Brien serves to open new lines of defence and counter-attack for the company as the businessman continues to build his stake in the organisation.

Having accused O'Brien of trying to destabilise INM at a briefing on its annual results two day ago, the company then questioned his business prowess by pointing to losses at his radio group Communicorp. It also sought to direct attention towards the performance of his Caribbean mobile phone empire, Digicel.

The thrust of the questions suggests, as might be expected in these circumstances, that it is keeping track in great detail of all of O'Brien's business activities.

O'Brien's spokesman had no comment yesterday on the questions raised by INM. However, sources close to him maintained the issue for INM was that the company deemed it "inappropriate" for a shareholder to ask pertinent and relevant questions and that a shareholder who did so was being branded a dissident.

The opening questions in the one-page document circulated by INM on Thursday at a press conference on its annual results set the tone of the one-page document: "What experience does Mr O'Brien have of ever managing a broad-based and internationally-diversified media group with the complexities and sophistication that INM demands? What experience, if any, does Mr O'Brien have in publishing - the core competency of INM?"

Implicit in this is INM's view that O'Brien would not be qualified to run the organisation were he to advance a takeover bid for the business.

While O'Brien has called for the retirement of Sir Anthony O'Reilly from the top post at INM, the company asked whether he could "point to any business that he has been associated with that has delivered sustained shareholder returns at the level enjoyed by INM shareholders" in the past 30 years.

"Isn't it a fact that Mr O'Brien has only ever run one public company in his life - Esat Telecom?"

In addition, INM pointed to some of O'Brien's failures in business, including the defunct electricity company ePower and the short-lived Home Shopping Television Network.

While the $800 million (€506 million) realised by O'Brien in a refinancing of Digicel last year is seen as cash cow for his expenditure of some €400 million on INM shares, INM appears to see a hint of vulnerability in that business at present.

Digicel is 100 per cent owned by O'Brien and managed as a private business, although junk bonds issued by the company trade on the public markets. Thus, information about its financial performance is routinely circulated to investors. Some of INM's questions imply it has seen some of the more recent data about Digicel.

"One of the most important metrics in evaluating Digicel is its ARPU (average revenue per unit). Is it true that Digicel's ARPU is now declining rapidly?" it asked.

Among other remarks, INM pointed to the high level of leverage in Digicel and asked whether its operations ever made a net profit. "Aren't these facts pertinent to INM shareholders, as Mr O'Brien has most recently been extolling the virtue of his investments in locations such as Haiti, while lecturing INM on why it should get rid of its consistently strong performing investments in South Africa and other markets?"

INM also referred to a recent transaction in which Mexican billionaire Carlos Slim, reputed to be the second-richest man in the world, acquired a Jamaican company called Oceanic Digital for some $70 million.

Estimating that Oceanic had 250,000 subscribers, INM put a value of $290 per subscriber on the deal. "At $290 per subscriber, isn't Digicel only worth approximately $1.7 billion, or approximately $1 billion less than its outstanding debt?"

If such questions are designed to undermine the argument that Mr O'Brien has access to virtually limitless wealth via Digicel, it is an indisputable fact that he would not be presenting such a problem for INM if he had not had cash to accumulate as many shares as he has. It is also possible that O'Brien could enter partnerships in the private equity world to fund a bid.

Given the parlous state of international credit markets, however, such a prospect must be seen at the moment as a long-term play.

While INM's share price rose another 7.6 per cent yesterday to close at €1.98, it is still nowhere near the levels of around €3.90 seen last year. Close observers interpret that as a clear sign that the market does not believe any bid is imminent.

Even so, INM's escalation of its defence this week was a public declaration that its guard is up for more fireworks from Denis O'Brien as his share-buying brings his stake close to the level held by Sir Anthony.

The conflict continues.