Esat pledges cheaper calls by year's end

THE MINISTER for Communications, Mr Lowry, has, finally signed the licence to allow Esat Digifone to operate the second GSM mobile phone system.

Its promoters have promised that the service will be available before the end of the year.

Mr Denis O'Brien, chairman of the consortium, yesterday reiterated his commitment to lower prices for mobile phone users, promising Esat Digifone would undercut current prices by "at least 25 per cent".

Eircell, the Telecom Eireann subsidiary, currently charges around 30p a minute.

The Irish/Norwegian consortium; was awarded the licence five months ago and is on track to start operation in the last quarter of the year, said Mr O'Brien.

The service will reach 80 per cent of the population on its launch date and will extent to 95 per cent within nine months, according to Mr O'Brien.

The final make up of the consortium was also disclosed yesterday. Mr O'Brien's company, Esat Telecom Holdings, is a 40 per cent shareholder as is the Norwegian state telecommunications company, Telenor. The financier, Mr Dermot Desmond, holds the remaining 20 per cent through IIU Nominees, a wholly owned subsidiary of his investment company, International Investment and Underwriting.

Mr Michael Walsh, of International Investment and Underwriting, confirmed Mr Desmond was the beneficial owner of the stake. The respective shareholdings are fixed, according to Mr Arve Johansen, managing director of Telenor Invest.

The shareholders have already spent £65 million on the new network, according to Mr O'Brien. This includes the £15 million licence fee, which was paid yesterday.

The process of drafting the licence was protracted because it was the first of its kind in the State's history, said Mr Lowry.

There was no need for undue, haste because the work of building the network was under way, he explained, and it was important to ensure that the licence complied fully with all relevant regulations.

One major issue that had to be resolved was the routing of international traffic into and out of the new network. Esat Digifone wanted to route international traffic through Esat Telecom, the private phone company owned by Esat Holdings.

Mr O'Brien said that Esat Digifone had accepted the Department's view that all international traffic have to be routed through Telecom Eireann, as outlined in the original memorandum of understanding on the licence.

However, the situation will change once the Irish telecommunications market becomes fully deregulated, he said. Esat Digifone hopes to capture half of the market for mobile phones. This equals a target customer base of between 300,000 and 400,000 within five years, according to Mr Barry Maloney, joint chief executive of Esat Digifone.

A customer base of 100,000 is required for the project to break even, according to Mr O'Brien. The entire investment to build the network will be at least £125 million, of which £65 million has been committed to date.

The project will be financed through a mix of equity, cash flow and debt finance.