The former chairman of CI╔, Mr Brian Joyce, cited a vivid example yesterday of the group's dire financial position in the mid-1990s. So low were ticket sales on the Limerick-Rosslare rail route that the losses would diminish if its rail company, Iarnr≤d ╔ireann, paid taxis to carry passengers instead of running trains. The company would still save money if it bought lunch for the passengers, he said.
Mr Joyce believed the group had "fundamental commercial flaws" due to poor funding. The cash crisis led its management to seek new revenues by constructing a telecoms network on the rail system for the Esat group.
As a subcommittee of the Oireachtas Joint Committee on Public Enterprise and Transport turned its attention from a stalled signalling contract to that deal, Mr Joyce was a principal witness.
The secretary general of the Department of Public Enterprise, Mr Brendan Touhy, and his predecessor, Mr John Loughrey, also gave evidence. Among other things, they were questioned about their contact with former Esat directors, Mr Denis O'Brien and Mr Pβdraig ╙ hUig∅nn.
The subcommittee was set up to establish why a £14 million rail-signalling project, which is incomplete, might ultimately cost more than £50 million.
CI╔'s connection with Esat, winner of the second mobile phone licence, is crucial. The inquiry has heard that another former board member at Esat, Mr Leslie Buckley, worked as consultant to Iarnr≤d ╔ireann during most of 1996. Just months later, when working as Esat's acting chief executive, he negotiated its deal with CI╔.
According to the opening statement of the inquiry's chairman, Mr Seβn Doherty TD, the agreement enabled Esat to construct an asset of considerable saleable value on State property.
Mr Loughrey was asked why Department of Finance guidelines on the disposal of State assets were not adhered to when CI╔ opened its railway to Esat. The guidelines said such assets should be auctioned or put to tender, but Mr Loughrey said it would be "crazy" to shackle a commercial semi-State organisation to such rigorous doctrines.
Mr Loughrey said much of his work as secretary general was confined to crisis management, but denied suggestions by Mr Doherty that this meant he was an "unusual mode" when CI╔'s deal with Esat was signed before the Department knew of it. "To the best of our abilities we scanned the horizons but this did not come up on our screen until it was a fait accompli," he said.
Mr Doherty said yesterday that the installation of the telecoms network might have delayed signalling work, adding to costs.
The same contractor, Modern Networks Ltd (MNL) was responsible for installation of both systems and the plan was to construct the systems simultaneously. But that did not happen due to delays in design work on the signalling project.
The subcommittee implied that Esat and CI╔ were contemplating a link at least three years before their deal. It produced a 1994 document on CI╔ paper which was titled "Telecoms Proposal: Joint Venture Prospectus". The document was discovered to the subcommittee by Esat, which was acquired by British Telecom in 2000.
Mr Joyce had no knowledge of the prospectus. He was appointed in November 1995 and believed nothing had come of the document. He said the idea of exploiting the system for telecoms was first mooted by the group's former chief executive, the late Mr Michael McDonnell.
MNL is now in provisional liquidation.
One of its former directors, Mr Thomas Cunningham, was asked why its managing director in January 1997, the late Mr Eamonn Daly, had suggested to Iarnr≤d ╔ireann that a possible link with Esat could be a "once in a lifetime" opportunity for the company. A day later the company submitted its tender for the signalling project and was chosen for the job.
Mr Cunningham explained Mr Daly's letter by saying Esat was keen to construct such a network and approached MNL in December 1996.