It is hard to credit that a company which owns cabling which provides television and radio signals to three Irish cities can be worth in excess of £300 million but that is the price that the five bidders for Cablelink seem prepared to offer. Such is the grip of television on the leisure time of the Irish people and such is the grip of Cablelink in cities in which it operates (total monopoly), that the company could sell for more than 60 times the profit it makes in a full year. Clearly, the prospective bidders are confident that television, particularly interactive television, and the Internet are going to swallow up even more of our time and money in the decades ahead.
Cablelink and the RTE Guide were the jewels in the RTE crown for many years; both were phenomenally popular, both were monopolies. Nine years ago the government, in the person of Mr Ray Burke as Minister for Communications, instructed RTE to sell Cablelink to Telecom Eireann. The RTE Authority refused but after much wrangling, Telecom ended up with a 75 per cent shareholding and RTE was left with 25 per cent. Telecom got an outstanding deal. At that time, Cablelink was hugely profitable, earning profits of £3.4 million on sales of only £13 million. Telecom bought in on the basis that Cablelink was worth £70 million; it will be selling out at a value nearly five times that figure.
Telecom was not particularly good for Cablelink. In its nine years of control, the company's turnover has nearly trebled but its profits rose by less than 60 per cent. Of course, having a monopoly means that the government is particularly resistant to requests for an increase in charges. But Cablelink has also suffered because European competition laws eventually would force Telecom and RTE to sell the company; both were shareholders principally to suppress competition. With the prospect of an eventual sale, Cablelink's shareholders, not unreasonably, had been reluctant to invest heavily in the company's infrastructure. Whoever buys it will have to find £200 million to upgrade its cabling.
From the point of view of the consumer, it matters little which of the five interested parties emerges as the winner. There are two Irish bidders, Cable Management Ireland Ltd (CMI) and Esat Telecom Group. CMI was set up ten years ago and operates 28 modest cable systems. It is much smaller than Cablelink and it will need a partner (probably from the US) with deep pockets for its binding bid. Esat is a phenomenally successful telecom company but it is not yet in profit and has huge debts. It too will need a wealthy partner. Another company, Tele-Communications Inc (TCI), which is 25 per cent owned by Independent Newspapers, will be a strong bidder because it controls Princes Holdings which already has 150,000 cable customers spread across the State.
The passing of Cablelink into new ownership will be good for the company and for the consumer. Instead of having cash-strapped shareholders who were there for defensive purposes, it will have an owner who is determined to invest heavily, widen its product range and deepen its penetration. But monopolies are bad for the consumer, as electricity users remembered last week. It will be important to ensure that whoever purchases Cablelink will, in time, face the full rigour of fair competition.