Quinn group to provide €28m to Smart

Businessman Seán Quinn could add mobile communications to his multiple interests following a €56.7 million deal involving Smart Telecom and Brendan Murtagh of Kingspan.

Smart announced yesterday that it has raised €56.7 million to finance the development of a third generation (3G) mobile network. Quinn Funding, a subsidiary of Mr Quinn's group, will loan Smart €28.35 million over two years at a rate of 12.5 per cent.Quinn Group has the option of converting its loan to Smart into shares in the company.

Mr Murtagh, who holds 20 per cent of Smart, has guaranteed bank loans of €28.35 million, bringing the total raised to €56.7 million. Smart will pay Mr Murtagh a €285,000 fee in return for the guarantee.

Mr Quinn controls Quinn Group, which manufactures cement, glass and radiators through various subsidiaries. It owns insurer Quinn Direct and holds a stake in stockbroker, NCB. If it decides to do this, Smart will issue it with 83.6 million shares, which will amount to 18 per cent of the telecoms company. The conversion option values the Smart shares that Quinn would receive at 23 pence sterling (34 cent) each.

Whether or not the Group opts to convert the loan to stock would depend on the Smart share price, and on whether or not it was valued at a premium to the loan amount and the interest.

Last month, Quinn Group bought a small stake in Smart during a fundraising round that earned €55 million for the telecoms company, which intends using it to expand its existing broadband business.

If Quinn decides to convert its loan, its total holding in Smart would be 19 per cent. The new deal means that the institutions and other shareholders who took part in last month's fundraising could see their holding diluted as a result of the Quinn Group deal.

Yesterday, Smart Telecom chief executive, Oisín Fanning, said that the company had made it clear to all potential investors in advance that it would have to raise further cash if it won the 3G licence. "We are adding another asset and the institutions can see that," he said.

Mr Murtagh's holding effectively barred him from entering any agreement with Smart that would give him a further significant interest in its shares.

Members of his family hold over 22 per cent of the company between them. If he acquired another 8 per cent, he and those associated with him would hold 30 per cent.

The rules of the London Stock Exchange, where Smart is listed, require any single party who acquires 30 per cent or more of a quoted company to bid for the rest of it. Smart approached Quinn Group, along with a number of other parties last month, seeking finance for the third generation network.

Communications regulator, ComReg, awarded Smart the last 3G licence available in the State last month. The company intends to have its service up and running in July. 3G technology allows mobile phone users to receive services like internet and video and audio streaming along with traditional voice and data.

Developing a complete network for this will cost Smart an estimated €200 million.

However, once it has 22 per cent of its network in place, it will be able to complete roaming agreements with the established players that will allow Smart subscribers to use the other networks where necessary.

Smart chief executive, Oisín Fanning, said yesterday that the company has already had talks with established players like Vodafone and O2, and they have indicated that they are willing to do roaming deals with the new entrant.