The sale of Cablelink was suspended last night amidst allegations that one of the companies interested in buying tried to rig the outcome, and that the consultants overseeing the deal accepted an invalid bid.
There was also surprise in the industry at the amounts being bid; the top price now being offered for the State-owned firm is said to be more than £500 million (€635 million).
In a late High Court proceeding at a judge's home, Esat Telecom argued that the sale of the company should be put on hold. Esat's chief executive, Mr Denis O'Brien, said he had been approached in New York by another company, NTL, and asked to "co-operate together and effectively fix the bid price".
"[He] suggested that by involving all bidders in a consortium, we would be in a position to fix the bid price at a greatly reduced figure," Mr O'Brien told Mr Justice O'Donovan.
The NTL executive then made a written approach to Esat, using secret code names to identify the other parties to the deal. He said the consortium would be owned 50 per cent by NTL (code-named "Neptune"), 25 per cent by Esat ("Elf"), and 25 per cent equally by two other companies bidding for Cablelink ("Cheetah"), TCI and UPC.
Esat said it had made the highest bid - £410 million - in time for last Friday's deadline. Mr O'Brien claimed that NM Rothschild, the London-based consultants managing the competition, should have ruled out a bid by NTL, which rather than name a price, offered to pay "15 per cent more than the highest bidder".
Rather than rejecting this bid and awarding the sale to Esat, Rothschild wrongly gave NTL another chance to put a monetary value on its bid, Mr O'Brien said.
Mr Bill Shipsey SC, for Mr O'Brien, said his clients had the legitimate expectation that the procedure whereby Cablelink would be sold would be exemplary and completely transparent.
Mr Justice O'Donovan issued orders restraining Telecom Eireann and RTE from selling Cablelink to NTL or anyone else until tomorrow. But he warned Mr O'Brien that if the other side could show that no such "formula" bid had in fact been made, "you are in terrible trouble".
Telecom Eireann and RTE last night described ESAT's challenge, which they would resist vigorously, as "utterly without foundation". They were totally satisfied with the bidding process. A spokesman for the Minister for Public Enterprise, Ms O'Rourke, offered no comment, saying that it was now a matter for the courts.
Meanwhile, industry analysts have expressed surprise at the price level being reached in the bidding for the State-owned cable service provider. At the start of this year most observers predicted a price of around £220 million; by last night it was rumoured that NTL's final bid was more than £500 million.
Successful bid for Cablelink seen as make or break time for Esat; Court report: page 16