Vodafone got better terms, Smart tells court

State communications regulator ComReg issued a mobile licence to Vodafone on terms that it was not subsequently prepared to accept from Smart Telecom, the High Court heard yesterday. Barry O'Halloran reports.

Last November, Smart successfully tendered for a third-generation (3G) mobile licence, beating off competition from Eircom and its subsidiary, Meteor. ComReg withdrew the offer in February because it says Smart failed to provide it with performance guarantees by an agreed deadline of January 30th.

The guarantees, or bonds, required Smart to pay penalties of up to €100 million if it failed to meet agreed milestones in building the network. The company says that it provided ComReg with draft bonds by January 30th and wants the High Court to order the regulator to issue the licence.

It emerged yesterday that when ComReg granted Vodafone a 3G licence in 2002, it accepted a bond from that company declaring that penalties would not be paid if the licence was terminated.

Smart included a similar term in its bonds, but the regulator told the company that this condition was unacceptable.

The drafts submitted by Smart stated that penalties would not be paid if the licence were "revoked". ComReg's in-house lawyer, Mark Hughes, told the court yesterday that he understood that the words "terminated" and "revoked" effectively meant the same thing.

However, Mr Hughes stated that he was not working for ComReg at the time that it issued the licence to Vodafone. He said he believed that the condition should not have been accepted.

"I do not believe that what was proposed [ in the Vodafone bond] would provide ComReg with security in the normal sense of the word," he said.

"I would have thought that such a provision should not be acceptable and was not acceptable." Asked by Mr Justice Peter Kelly if he believed the Vodafone bond set a bad precedent, he replied "that's correct".

Smart's drafts also included a condition declaring that penalties would not be paid if it became insolvent, which ComReg also rejected. But the company says it told the regulator that it was prepared to change both of the disputed conditions.

Under cross-examination by Michael Cush, Smart's senior counsel, Mr Hughes also confirmed in court yesterday that three days after the January 30th deadline had passed, ComReg was willing to grant the licence to Smart once it received acceptable bonds within a reasonable period of time.

He also confirmed that Smart chief executive Oisín Fanning had told the regulator that the company was "not immovable" on either of the conditions that ComReg said were unacceptable.

Two of the draft bonds were provided by BT and Chinese multinational, Huawei, which were to build the network and supply the technology. Their banks underwrote the bonds and included the insolvency and revocation conditions in the bonds.