OFFICIAL confirmation that CIE and Esat Telecom are set to join forces to provide an alternative national network is the latest in a series of moves which are poised to radically shake up the telecoms industry.
At stake is a £1 billion market, which is growing rapidly. And by comparison, at £25 million, the Esat investment looks like good value, compared to the reported £50 million being jointly invested if the British Telecom/ESB deal goes ahead.
The deal spells the end of the line for Telecom Eireann's monopoly, perhaps a bit quicker than Telecom would have liked. From next month, other telecoms networks can be offered to business customers to route their calls. Telecoms companies, which have the expertise, are thus negotiating with semi states like ESB and CIE, which have existing networks which can now be used to compete with Telecom Eireann.
Up to now operators such as Esat, British Telecom (BT), Cable & Wireless, Stentor and TCL could compete for the business from corporate customers calls nationally and internationally. But they have had to lease lines from Telecom Eireann to carry the traffic internally.
Telecom's rivals have constantly complained that they are being charged very high rates to lease lines from the state operator. Esat's move means they can avoid these charges. They should be able to pass on the savings to customers, because they will also have a lower general cost base. "Our leased lines costs are the highest in Europe," Esat's chairman, Mr Denis O'Brien, said last night.
Industry sources broadly welcomed the announcement. If BT succeeds in clinching a deal with the ESB this will mean that essentially three operators will be in the market, providing alternative infrastructure Telecom Eireann, Esat and BT.
It is likely that Esat and BT will sell on capacity on the networks, to other, albeit rival telecoms operators in Ireland. Therefore, industry experts say, there will not be a rush to build alternative networks. For many, leasing lines, at an undoubtedly cheaper rate, will make more sense.
It is also expected that Telecom Eireann will lower its inland (long distance) call charges. Its chief executive, Mr Alfie Kane, admitted earlier this year that these charges need to be reduced from around 20p to 10p per minute.
The deal is a good one for CIE because it means it will get a new signalling system for virtually nothing, plus an advanced communications system.
For Esat, it is buying the way leaves which CIE have. It points out that CIE has lines (not all currently in use) into most major towns in Ireland.
The semistates, including CIE and ESB have been courted by several telecoms operators, but Esat seems to have stolen a march on its rivals by being the first to do a deal. RTE is tipped as the next candidate for a joint venture with a telecoms company.
