Dáil Éireann debate -
Thursday, 28 Mar 1996

Vol. 463 No. 5

Adjournment Debate. - Telecom Éireann Strategic Alliance Process.

Mr. S. Brennan

Telecom Éireann remains one of the State's finest companies and through no fault of that company the strategic alliance process is now in a shambles. This was due solely to confusion in the Cabinet about what will happen to the remaining 65 per cent stake in Telecom Éireann. Apparently nobody can get a clear answer from the Government on that.

The Minister for Transport, Energy and Communications, Deputy Lowry, has evidently completely mishandled this process. He failed to get agreement from his Cabinet colleagues on a mandate for the Telecom Éireann negotiations. The year lost was vital because of the pace of change in telecommunications and the rapid arrival of full competition. He also failed to clear up the position regarding the remaining 65 per cent of the company for the parties interested in Telecom Éireann. This lack of clarity and the confusion within the Cabinet led directly to eight of the ten interested groups withdrawing from the process. There is something fundamentally wrong when so many good partners withdraw yet the Government persists.

While money is not the primary consideration in getting a partner for Telecom Éireann, that company remains a jewel in the State's crown and it should not be given away in a fire sale. Fianna Fáil will oppose any panic sale of 35 per cent of Telecom Éireann in this derisory, knock-down fashion, as is currently the intention of the Minister especially now that there is only one horse left in the race.

The Minister's handling of this process during the past year has resulted directly in one of the partners bidding £200 million less than was on offer for a stake in Telecom Éireann. Twelve months ago the Minister spoke of £500 million for this share of the company, but I understand the offer is now in the region of £250 million. That is some ministerial miscalculation. The Minister wasted vast sums of taxpayers' money on this flawed exercise. Consultancy fees on the strategic alliance process amounted to £4.1 million and that figure will increase. That expense in fees for a one horse race is a scandal and the Minister should stop the process. Fianna Fáil will table a Private Members' motion condemning the Minister's handling of the process and demanding that he stops it. Effective negotiations are not possible when competition is reduced to a one horse race.

It is also worth noting that Irish companies need not apply. Recently £250 million of Irish pension funds was invested in foreign telecommunication companies, not in Telecom Éireann. Those foreign companies are not being asked to put Irish pension funds into Telecom Éireann. Why are Irish investors excluded from this company? We will call for a full debate and public consultations on the future of Telecom Éireann. This would help to chart the future direction of the company now that it is in a shambles and a strategic alliance process has effectively collapsed.

I call on the Minister to explain why he claimed Ireland's derogation was safe, but at a Council of Minister's meeting last week voted against a decision pushed through by other EU Ministers. I would like that position cleared up. The Minister negotiated a bad deal for the taxpayer. It cost hundreds of millions of pounds and the process should be stopped.

Mr. Stagg

Preliminary proposals have been received from not one but two parties interested in entering into an equity based strategic alliance with Telecom Éireann. These two partners are a consortium of KPN and Telia, the Dutch and Swedish public telecommunications operators respectively, on the one hand, and Teledanmark, the Danish public telecommunications operator on the other. Each of these parties has an outstanding reputation in the telecommunications industry. They have experience both in their home markets and internationally which would be of interest to Telecom Éireann as it continues its development and restructuring in preparation for full competitive markets.

These preliminary proposals are currently being evaluated by representatives of my Department, the Department of Finance, Telecom Éireann and the advisers to the stategic alliance process. This evaluation is not yet complete. The assessment of the proposals includes consideration of the ability and commitment of the potential partner to assist Telecom Éireann to adapt to an emerging competitive marketplace. This is the key purpose of the strategic alliance.

There has been considerable publicity and speculation regarding the contents of the bids received and regarding the whole strategic alliance process. The bidding process is a sensitive, commercial process for those involved. It is important for the success of this process that it be allowed to continue without interference from external factors and that a negotiation position is not compromised by disclosure.

Recent withdrawals from the process are not a reflection on the selection process nor on the attractiveness of Telecom Éireann as an investment opportunity. Those companies which withdrew did so for their own reasons. We have two parties who are interested in Telecom Éireann and it is important that we pursue this interest for the benefit of not just the company but the economy generally.

The Government's objectives for the telecommunications sector and for Telecom Éireann remain steadfast. The national policy objective is to achieve a telecommunications sector which is in the upper quartile of OECD indicators of price, quality and availability as soon as possible. The basis for this policy is that the long-term economic prosperity of the country is heavily dependent on the provision of top quality telecommunications services at competitive prices.

The Government's strategy for the sector embraces the introduction of full competition. However it is important that the transition to full competition proceed in a fair manner to Telecom Éireann while taking into account the interests of the consumer and of other players in the market.

Ireland may avail of a derogation of five years to 1 January 2003 in relation to the introduction of competition in voice telephony services and the construction of telecommunications infrastructure independent of that of Telecom Éireann for the commercial provision of services. However, the Government has decided to allow full competition in network and voice services from 1 January 2000 — a derogation of only two years. The agreement reached in relation to the draft Interconnection Directive at the Telecommunications Council last week did not as was suggested in press reports undermine this derogation. Commissioner Bangemann confirmed that the political decisions taken by the ministerial Council on these derogations in 1993 and 1994 remains in place. The draft directive allows certain member states, including Ireland, to defer cross-border interconnection by mobile phone operators for the duration of the derogation. This is very important in order to defend the international revenue of Telecom Éireann for the period needed to complete the restructuring of the company — that is, up to 2000. The Minister said he would have preferred in the interest of clarity in the directive if that deferment had not been limited to international traffic. However, in other articles in the directive it is provided, for example, that only operators with significant market power, as defined nationally, will be compelled to grant interconnection. This directive, which will not be finally adopted for several months yet, is only one part of a regulatory framework being put in place by the European Union in preparation for the liberalisation of the market.

There are several other directives and proposals for directives each of which contains a deferment clause applicable to the states, including Ireland, which are eligible for the derogation.

The Government strategy for telecommunications is one which recognises the realities of the marketplace but also has special regard for Irish needs and circumstances. That strategy is realistic and is being fully implemented and will represent an important contribution to economic growth and development into the medium term.

I assure the House and the Deputy there is not panic or a scandal and there will not be a fire sale.

Mr. S. Brennan

There are no purchasers.

The Dáil adjourned at 5.20 p.m. until 2.30 p.m. on Tuesday, 2 April 1996.