ESB to make £100m profit on Ocean deal
The ESB will make a profit of about £100 million (€127 million) on the disposal of its stake in Ocean, which it is selling to its joint venture partner British Telecom (BT) in a deal valuing the telecoms firm at £355 million. US insurance group AIG is the other beneficiary of the agreement, gaining about £65 million.
The ESB holds about 60 per cent and AIG owns about 40 per cent of ESBIT Ltd, the consortium which owns half of Ocean. BT owns the other half.
Earlier this week, the ESB dropped a High Court challenge to BT's £1.9 billion agreed bid for telecoms firm Esat. The Stateowned company had argued that Ocean's shareholder agreement with BT precluded the British firm from competing in the telecoms market against Ocean. Court hearings were adjourned on several occasions as negotiations on the sale of ESBIT's stake in Ocean continued.
BT's purchase of Ocean represents a substantial profit for the ESB, which had invested some £13.5 million in the firm, established in June 1998. AIG had invested some £9 million in the venture.
A BT spokesman declined to comment on its long-term plans for Ocean, stating that it was too early to speculate on the future. But the deal was welcomed by Ocean, which said it hoped to generate revenues of more than £20 million this year, almost three times its turnover of £7 million in 1999.
In a statement, Ocean's chief executive, Mr George McGrath, said the deal was a "vote of confidence" in the firm. "The creation of over £300 million in shareholder value [in 18 months] is no mean achievement," he said.
It is understood that Ocean's particular strengths over Esat's business lie in its e-business systems, its secure Internet communication business and its connectivity with BT's network in the North and in Britain, which are perceived to be more advanced than Esat's system.
Ocean will continue to use the ESB's telecommunications infrastructure under its original contract with the electricity supplier, which was for 25 years. Asked whether this would be reviewed, given BT's acquisition of Esat's infrastructure, Ocean's chief executive Mr George McGrath said: "Not in the immediate future." Both Mr McGrath and an ESB spokesman declined to reveal the value of the contract.
The arrangement is non-exclusive, which means that the ESB is free to enter into arrangements with other telecommunications providers.
Ocean is currently targeting the residential telephone market with a £500,000 advertising campaign, offering services with no minimum charge per call. Mr McGrath said the company had commenced a leaflet drop on the service to 1.2 million households, but he declined to comment on the performance of the initiative.
It is understood that BT's current chief executive in Northern Ireland, Mr Hanif Lalani, is likely to take the position of chairman at Ocean, replacing Mr Donal Curtin. Mr Curtin is managing director of the International Investments business unit at ESB. Mr McGrath, who was to stand down as chief executive of Ocean, is to retain his position.
The company, which employs about 300 workers, claims more than 10,000 fixed-line customers, mostly in the business market. It also claims more than 90,000 customers for its Oceanfree.net "no fee" Internet access service.
Ocean is also spending £20 million building a high-capacity fibre-optic network linking Limerick, Shannon, Galway and Athlone, to be known as the "Western Digital Corridor". This will supplement Ocean's existing network elsewhere in the State and in the North, which is valued at more than £40 million.
Meanwhile, the ESB told the High Court yesterday that it is "very satisfied" with the terms of settlement of legal proceedings which had threatened the £1.9 billion takeover of Esat Telecom by British Telecom.
Mr Mel Christle SC, for the ESB, said that, in the circumstances, the proceedings, initiated by the ESB, could be struck out.
Mr Justice O'Donovan struck out the entire proceedings with no further order.