Dáil Éireann debate -
Thursday, 3 Mar 1994

Vol. 439 No. 7

Adjournment Debate. - Proposed Private Company Investment in Telecom Éireann.

Mr. Gilmore

I thank you for allowing me to raise this matter on the Adjournment.

This issue relates to a development which the Tánaiste stated would break up this Coalition Government. On 24 May last the Tánaiste said in Cork that if Fianna Fáil insisted on including the privatisation of Telecom Éireann on its agenda, it would not be in Government with Labour. He went on to state that the Government would be failing in its duty if it were to be seen to be looking for a fast buck by selling off part of such an important strategic asset.

The offer from Cable & Wireless to buy a 25 per cent share in Telecom Éireann's international business, if accepted by the Government, will amount to a sell off of a significant part of Telecom Éireann. The Government is, of course, anxious to dress it up as a strategic alliance, but this cannot disguise the simple fact that it is a part privatisation of Telecom Éireann and the time has arrived to test the Tánaiste's word about the future of the Government.

No doubt anxious to avoid the political embarrassment of their coalition partners, both the Taoiseach and the Minister for Transport, Energy and Communications told this House this morning that they did not know about the Cable & Wireless proposal until 9.30 last night. This statement is simply not true. Not only did the Taoiseach know about the Cable & Wireless interest in Telecom but he was instrumental in teeing it up at a meeting in 1992 with Lord Young, the Chairman of Cable & Wireless.

On 23 May last, a British Sunday newspaper reported that Cable & Wireless, led by Lord Young, was engaged in high level talks in Dublin with the Irish Government about the purchase of a significant shareholding in Telecom Éireann. The Irish Times of 25 May reported that Government sources has confirmed that the Taoiseach had met Lord Young and had discussed “the general possibility of co-operation”.

Unfortunately this House was denied the opportunity of questioning the Taoiseach about these meetings because the Ceann Comhairle disallowed a question to him on the grounds that the Taoiseach did not have responsibility to the House on the matter. However, on 1 July last, I had the opportunity to question the Minister for Transport, Energy and Communications about the Taoiseach's meetings with Lord Young and in a disingenuous reply the Minister stated: "Presumably the reason the Taoiseach spoke to Lord Young about Telecom Éireann was that the subject came up in conversation between them".

The Government is now trying to tell us that despite widely reported and acknowledged meetings between the Taoiseach and Lord Young at which Telecom Éireann was discussed, the Cable & Wireless attempt to buy into Telecom Éireann was never on the agenda — that despite widespread newspaper reports of the Cable & Wireless bid, both the Taoiseach and the Minister were taken completely by surprise at 9.30 last night. That kind of subterfuge is not acceptable. The sale of part of Telecom Éireann, in this case a part of the company's most profitable international business, was no surprise to the Government. It was hatched out in the Taoiseach's talks with Lord Young.

Telecom Éireann has, for some time, been considering the possibility of strategic alliances to exploit the international telecommunications business. Such an approach would be welcome, but the current proposal for Cable and Wireless represents cherry-picking of the most profitable part of Telecom's business. The hiving off of the international business of Telecom Éireann to a part-privatised company will expose not only the staff of Telecom Eireann but also domestic consumers who will be left to pay higher telephone charges to a phone company stripped of its most profitable activity.

We now need a clear statement from the Taoiseach about this meeting with Lord Young and an assurance from the Minister and the Taoiseach that this deal will not go ahead and that no joint venture or strategic alliance will be concluded without the agreement of the staff of Telecom Éireann and the consent of this House.

There must be an end to the old Fianna Fáil trick in dealing with the issue of privatisation. This is not the first time a Fianna Fáil Taoiseach and Minister have come to this House and tried to convince us that selling off part of a State company does not constitute privatisation. When the Government was selling the Irish Sugar Company the then Minister for Agriculture and Food repeatedly stated in the House that selling off parts of the Irish Sugar Company did not constitute privatisation. We now know that the company was privatised, and in time to come we will know that this deal is the first step in the privatisation of Telecom Éireann.

Minister for Transport, Energy and Communications (Mr. Cowen)

The statement I made last night is the factual position and I would ask that my bona fides in this matter be accepted. The statement the Taoiseach made today is the factual position and his bona fides in this matter were accepted by every Member of the House except Deputy Gilmore.

Mr. Gilmore

How could it be the factual position when the Taoiseach spoke to Lord Young about it almost a year ago?

An Ceann Comhairle

Deputy Gilmore was allowed to speak without interruption and he must allow the same courtesy to the Minister.

Mr. Gilmore

I will be courteous.

Mr. Cowen

The mandate laid down for State companies in the Programme for Government is that "the main strategic initiatives and enterprises remain in the ownership of the Irish people while having the freedom to enter joint ventures with the private sector". The role of these enterprises was further developed in the Programme for Competitiveness and Work which charged them with "the delivery of services which are efficient, effective and able to compete in the markets they serve". It is in this context, therefore, and in keeping with this mandate that I have asked Telecom Éireann to complete an examination it has already begun to evaluate fully the role, nature, scope and structure of strategic alliances with all potential partners in fulfilling its mandate.

The provision of efficient, wide-ranging and competitive telecommunications services is essential not only for our business sector but for domestic customers as well. As a result of changes in technology, the merging of many communications channels and the much more aggressive competitive nature of the market, many telecommunications companies see threats and opportunities in the developments which are already taking place and in how the future is likely to evolve. As a result there are significant structural changes in the way telecommunications companies are operating worldwide and this is leading to new alliances, mergers and acquisitions between competing and related companies and groups. It would not be in the interest of Telecom Éireann, the Irish taxpayer or Irish consumers that the company would remain detached from these developments. It is a fact that the Government, as its shareholder, has recognised. I am glad to note that it is also recognised by the company's management and staff.

Given developments in the worldwide markets it is predictable that other telecommunications companies see opportunities for acquisition, expansion and investment overseas. It is in this context that Cable & Wireless submitted a proposal earlier this week to enter into a strategic alliance with Telecom Éireann by way of a joint venture between the two companies in which Cable & Wireless would hold a minority stake. This proposal arises originally from exploratory contacts between the parties some time ago initiated by Cable & Wireless.

In so far as the proposal contains financial details, these are tentative and conditional on several critical assumptions made by Cable & Wireless. Furthermore, Cable & Wireless is only one of the overseas telecommunications companies expressing a potential interest in a linkage with Telecom Éireann. In these circumstances, it would be premature and inadvisable for me to divulge the exact details of the proposal at this stage. This might well prejudice the terms of any other proposals that may emerge. While neither this specific proposal nor any alternative has been considered by the Government, I wish to make it clear that any decision on possible future strategic alliances between Telecom Éireann and any potential partner is a matter for me as Minister responsible for this sector in the first instance and for the Government as shareholder and will be taken in the context of the clear policy as stated in the Programme for Government. This possibility has never been the case as far as I was concerned, and there is no question now of the Government taking up any individual proposal in isolation. The full range of options will only emerge from the exercise I have today directed Telecom Éireann to undertake.

The Government must be satisfied that all possible options are on the table and have been properly evaluated. In doing so, it is clear that account must be taken of the needs of the wider economy and the necessity to ensure that the main utility services impose the lowest possible burden on our international competitiveness.

I have, therefore, asked the Board of Telecom Éireann to consider, as a clear priority, the options for the future of the company and, in particular, the type of arrangement or strategic alliance it believes would best fit the strategic mission of the company, the interests of the wider economy, of consumers and the employees of the company. I have also asked it to draw up a full list of potential partners which would have the corporate identikit which would best fit the strategic mission of Telecom Éireann. The board should report to me on all these matters within six months. As part of this assessment it will take into account the Cable & Wireless proposal.

In the meantime, I am pressing ahead with determination of the appropriate future regulatory regime in line with EU requirements in the whole telecommunications sector. This is necessary before determining the strategic future of the company. In any event potential partners would need to know the regulatory terms on which they enter into an alliance or joint venture.

Telecom Éireann and its employees have demonstrated an admirable ability to manage necessary change in recent years. I am confident that these qualities will stand them in good stead in the future when rapid technological and regulatory changes will have to be taken on board. My intention is that the Government will facilitate management of these changes in such a way to ensure the long term growth and wellbeing of the company, its employees, its consumers and the telecommunications sector in general.