Cantillon

Inside the world of business

Just too hard: little room in mobile market

IT’S BRUTAL out there for domestic service providers. There was no clearer signal of this than Just Mobile’s decision to wind down its operation after 10 months in business. The reason? No investor was willing to stump up the follow-on cash the virtual operator needed to get to break-even – about €2 million.

Just Mobile made mistakes with its launch. It was undercapitalised and its tariff structure didn’t cut the mustard and was changed.

In March, advertising agency Owens DDB took the highly unusual step of pursuing a winding up order against the company. The dispute was resolved but it can’t have helped the image of the company with suppliers.

There was bad luck, too. A mooted distribution deal with Superquinn became a victim of the supermarket’s own financial difficulties. And, in spite of predictions to the contrary, the economy shows no signs of growth.

There was, however, one other key factor: competition. Global mobile giants Vodafone and O2 are the dominant players, while 3 and Eircom have been spending large sums to secure market share. Tesco Mobile is also aggressively seeking customers. There’s only so much of the recession cake to go around.

Other virtual operators are said to be circling the Irish market. Just Mobile’s demise should give them pause for thought.

No blood from stones in Nama

NAMA’S PUBLICATION of its first annual report provoked howls of outrage from certain quarters who saw the numbers as confirmation that it was, as had been suspected all along, a builders’ bailout.

In truth there was little new in the figures. The whole point of Nama was that it was a vehicle to allow the banks write off land and development loans. Nobody in their right mind thought that this money was going to be recouped from the original borrowers.

But, taxpayers are right to be concerned about what appears to be a change in rhetoric. Talk of pursuing developers for every last penny has been replaced by terms such as “every euro feasible”.

This line acknowledges that blood simply cannot be got from a stone. Nama has and will cut deals with developers who are prepared to co-operate with it and has indicated that in some cases they will keep 10 per cent of everything they generate above a certain minimum.

Where exactly Nama draws this line in its dealings with any particular developer is what will distinguish a pragmatic arrangement from a bailout. The example given by Nama would see a developer expected to repay €540 million plus working capital on loans of €1 billion bought by Nama from the banks for €480 million. Anything above that and he gets 10 per cent. If Nama adheres to this example the taxpayer will probably be getting as good a deal as possible.

Unfortunately the details of all the arrangements will be kept secret. The real issues here are transparency and accountability. Neither of which are Nama’s strong suit.

TODAY

Live register figures to be published while the ECB will announce its latest decision on interest rates

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