Dáil Éireann debate -
Wednesday, 26 Jul 1995

Vol. 455 No. 7

Adjournment Debate. - Future of Telecom Éireann.

Mr. S. Brennan

I hope the Minister will have some news for the House on the proposed part-privatisation of Telecom Éireann by the Government. Telecom Éireann is Ireland's most successful and largest State-owned company. If it is the Government's intention to privatise a large part of it this House should be informed at an early date. I hope the differences between the parties were resolved at today's Cabinet meeting and the Minister can announce the Government's privatisation programme for a large part of Telecom Éireann through a sale to foreign investors, if that is the Government's policy. I raise this matter to seek that information.

On 4 May, almost three months ago, the Minister told a conference in Galway that in two weeks' time he would announce the mandate. If he announces it today it will be three months from the date of the conference. I will be glad to get the information whenever it comes, but that is a considerable delay over the Minister's timetable.

The Minister may remind me again of my own ducking and weaving but that public relations script has been used in the House on several occasions and I recommend the Minister have his public relations advisers freshen it up. Let him not tell me he is decisive and that I have been ducking and weaving. I hope we can leave that act behind us and deal with the issue in hand.

Will the Minister tell me what the destination of the proceeds of the sale will be? If he sells 35 per cent of Telecom Éireann will the money be used to reduce the company's debt? If not, what is the logic behind the sale? Will the proceeds be used to reduce the national debt or for the company's benefit?

Will the Minister release the secret reports he has commissioned and the reports he has received from the company? I suggested previously that the commercially sensitive information could be omitted. However, it is a disgrace that over one third of Ireland's largest State company may be sold to foreigners without a proper debate, without the House being fully briefed and without the necessary reports in the Minister's possession being made available. Such secrecy is regrettable.

Has the Minister considered the comments of Dr. Michael Smurfit who suggested that the type of sale envisaged of 35 per cent of the company to overseas investors was a defensive strategy? Has the Minister considered an offensive strategy; for example, Telecom Éireann taking a stake in other companies or moving into Northern Ireland or the UK? Is the sale being envisaged a distress sale and a defensive strategy? Has the Minister considered the unions' point that a share swap between Telecom Éireann and British Telecom, for example, would be a fairer way to raise a few hundred million pounds than a cash sale? Telecom Éireann could do with such funds but does not urgently need them.

Does the Minister think it is too early to do what he proposes? The Minister has had considerable success in business and I could not imagine him selling off one third of a company before putting its house in order rather than letting the buyers do so after the sale. If Telecom Éireann needs to be restructured and redundancies and cost reductions are to be brought about, why does the company not do that now under the Minister's instructions rather than look to a foreign investor to do the dirty work that neither Telecom Éireann nor the Minister seem able or wish to do? It would be normal commercial practice to sort out a company's difficulties before selling off a part of it to other investors and hope they will do so.

I have been asking for the various reports because I wonder if this House and the public are entitled to debate any alternatives. Is the sale of a part of Telecom Éireann to overseas investors a proposal cast in stone that cannot be debated? Most other countries considered the stock exchange or financial institutions when fresh investment was sought. Has the Minister taken a definite decision not to permit the financial institutions in Ireland and Irish pension funds to invest? Why are foreign concerns only allowed to invest in Telecom Éireann at this stage? Why are Irish investors specifically excluded from the mandate if that is the case? Will the Minister tell the House if investment from financial institutions was considered?

I thank the Minister for coming to the House to debate this matter at short notice. I remind him that Telecom Éireann is the jewel in the semi-State crown; it is not the fiefdom of any Government. Its business should be done in public. I ask for a public debate on the future of Telecom Éireann. The company is not in distress; it has a turnover of £900 million and profits of nearly £100 million. It has a debt equity ratio of 2:1, which is not bad when compared with many private companies and it is getting a 10 per cent return on its capital. There is no panic or rush to obtain £400 million to boost next year's budget. What is needed is a debate on the options facing Telecom Éireann, including the possibility of Irish investors taking a share in the company rather than selling it to overseas investors.

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

I thank Deputy Brennan for raising this issue. He asked relevant and pertinent questions as well as pointing out that fundamental and important decisions remain to be taken. For that very reason I have been studying this matter extremely carefully with my Department and Telecom Éireann and we have made substantial progress. The process is at an advanced stage and we will shortly be in a position to make final decisions. A number of the points raised by Deputy Brennan are relevant in that context and I will take them into consideration.

Irrespective of what speculation there may be, we will not be rushed into making a decision. When we do it will be an informed one and in the best interests of the future of Telecom Éireann, its workforce and those who depend on the company for vital services.

It is nonsense to suggest that there is any division in Government on the question of the strategic alliance as it is at one on this issue. The strategic alliance is a key element of building a telecommunications sector which will offer consumers world class services. Anything else risks compromising our capacity to compete in the global marketplace.

I want to state in practical terms why telecommunications is so important to employment. Between 1983 and 1994, the overall level of employment here grew by 3 per cent. At the same time, employment in agriculture fell by almost 20 per cent. Employment in industry declined by 4 per cent. Alone of all the sectors, employment in services grew by 13 per cent.

It is primarily the services sector which is providing employment growth not just in Ireland but in the OECD as a whole. The average service job is over six times as dependent on telecommunications as a job in industry. These service jobs have come and will continue to be created in Ireland in ever increasing numbers. We have the skilled workforce, the infrastructure and the technological capacity necessary for success. The drive for alliances and the increased competitive thrust in telecommunications generally is being accelerated by actions taken at EU level where each month brings new proposals and initiatives for sectoral liberalisation. Voice telephony services will be liberalised in most of the Union on 1 January 1998. Infrastructure will be liberalised on the same date. Rules for licensing, regulation and the provision of universal service are being drawn up by the Commission at present.

Put simply, the Commission is no longer prepared to sit and wait for the member states to take the necessary action. It is taking a lead role in systematically opening up every aspect of the sector to competition. Equally it is increasingly vigilant in policing the operation of the sector to ensure against the abuse of dominant positions by incumbent monopolies.

My point is simple. The days in which national economies could determine the shape of their telecommunications sectors in every respect are drawing to a close. There is an international consensus that the fragmented and monopolistic structure of the sector is now rendered obsolete, unnecessary and undesirable. Our task is to recognise and adapt quickly to these trends and to make the best of the emerging situation which holds so much promise for the economy generally.

Ireland will not stand alone and ignore the major trends in world telecommunications. Customer expectations are setting the agenda for providers of telecommunications services. Irish business and consumers deserve no less than their counterparts in the rest of the developed world. The new world of communications can, I am convinced, compensate for the physical disadvantage of our peripherality.

Therefore, the need for an alliance is without question at this stage. Nor can there can be any question of a delay or a lack of commitment by the Government to the business of finding a suitable partner for Telecom Éireann.

The first steps have already been taken in this process. These have included the canvassing of initial expressions of interest by relevant companies and the preparation of strategy positions by the company and my own Department. Currently, the Government is recruiting consultants to advise it on the conduct of negotiations and conclusion of agreement on the alliance issue. Telecom Éireann likewise is separately recruiting consultants to assist the company in that area.

We are now on the threshold of decisions which will dictate the future of telecommunications and indeed have a major impact on our future economic growth. Firstly we must decide in the context of the critical importance of telecommunications what our requirements of a strategic partner are. Any future partner must be able to demonstrate a long term commitment to the Irish market. They must also be able to contribute to our overall national policy goals and in addition assist in enabling Telecom Éireann to become a major player in a new liberalised market. The capacity of a partner to generate additional job opportunities will also be extremely important.

In addition we must address the key issues of liberalisation, regulation and the alliance structure. I have already stated that an alliance must be equity based and it is my intention that the requirements of Telecom Éireann's balance sheet will have first call on any proceeds arising from equity sale. But it will be made clear to all of the interested parties that Telecom Éireann will remain in majority public ownership.

All of these issues are being addressed in a mandate for negotiations which will emanate from my Department. This mandate was not on today's Government agenda but a worthwhile discussion took place on all of these issues. Clearly both the principle of the strategic alliance and the broad parameters of our policy stance have been agreed by Government. Work on a few remaining details will in no way prejudice the success of the broader process. A formal position will be agreed by Government very shortly enabling the release of the mandate.

A huge amount of work has gone into the preparation of the mandate. What is going on at present is a matter of fine tuning the agreement. We are doing this to make sure that we get it right first time. There will be no delay in the overall process as the necessary background work currently ongoing in Telecom and my Department on the preparation of an information memorandum for interested parties will in any case take a number of weeks to complete. I am satisfied that the way can be cleared for the process of negotiation with interested parties to begin in earnest very shortly. Equally I am happy, based on my contacts with the interested parties, that these companies are comfortable with the timetable emerging with respect to the alliance.

The Dáil adjourned at 6.10 p.m. until 11 a.m. on Wednesday, 20 September 1995.