Eircom may end up with 3G licence

Eircom could be offered a new mobile licence following yesterday's High Court ruling that upheld ComReg's decision to withdraw the same offer from Smart Telecom.

ComReg withdrew the offer of a third generation (3G) mobile licence from Smart in February in a row over financial bonds required from the company as a condition of getting the licence.

Smart went to the High Court in July seeking an order restoring the offer. But Mr Justice Peter Kelly ruled in the regulator's favour yesterday.

He gave 28 days to Smart to seek leave to appeal. However, it is believed that the company, over which businessman Brendan Murtagh is set to take control, is unlikely to do this.

If Smart does not appeal then ComReg will be free to offer the licence to Eircom. The fixed-line player came second in the competition run for the licence last year.

It already owns a mobile business as a result of last year's €420 million takeover of Meteor. Eircom, now owned by Australian venture capitalist, Babcock & Brown, controls around 80 per cent of the fixed telephone lines in the Republic.

ComReg said yesterday that, pending an appeal, it would "make arrangements to offer the fourth 3G licence". This means it will not open a new competition and move to offer the licence to the next in line.

Justice Kelly refused to continue an injunction that prevented ComReg from offering the licence to another operator. He pointed out that it was up to the regulator to decide how to proceed with that issue.

Eircom yesterday said it welcomed his ruling but did not comment beyond that. Smart said it would read the judgment before making any decision.

Smart made it clear yesterday that it intended to focus on its broadband business, which consists of 17,000 residential customers and 160 businesses.

It also noted that developing a 3G network would cost around €300 million. Justice Kelly made his ruling as Smart's shareholders voted at a meeting in Dublin's Alexander Hotel to give control of the troubled group to Calally Ltd, a company controlled by Mr Murtagh.

As part of the deal, Smart will receive 10 per cent of Calally and the company will delist from the London Stock Exchange. The transaction leaves shareholders with 10 per cent of the business.

Mr Murtagh is better known as a founder of the Kingspan building materials group. He owns 20 per cent of Smart and he and his family are said to have invested over €25 million in the business.

Calally will inherit Smart's €40 million in debts. The telecom company's acting chief executive, Ciarán Casey, and his fellow directors, pledged yesterday that creditors would be repaid.

Mr Casey told the meeting that Smart had hired accountant Hugh Cooney of BDO Simpson Xavier to restructure its finances.

"A detailed payment plan will now be formulated by Mr Cooney and presented to all creditors," he said. He added that all agreed debts would be fully repaid in a reasonable time.

According to financial controller, Brian Timmons, less than 10 per cent, or €4 million, of the total debt is owed to Mr Murtagh. He loaned the company €2.5 million recently.

Directors told shareholders in early September that he and a number of others were providing it with the €2.5 million - €3 million a month it needed to keep trading.