Amendment No. 8 is in the name of Deputy Molloy. Amendments Nos. 9, 10, 11 and 12 are related and may be discussed together.
SECTION 8.
I move amendment No. 8:
In page 8, subsection (1), line 17, to delete "buy".
We heard the Minister speak earlier about reductions averaging 6 per cent in telecommunications charges.
I was not talking of possible reductions. I was talking about certain reductions that will be in the Minister's order.
Not necessarily for domestic consumers.
For the basket of services.
There is a difference.
On the announcement of a minimal reduction in telephone charges we should record the level of current inefficiencies in the Irish telecommunications sector. They are currently costing phone users here an estimated £100 million a year. The recent telephone users' advisory group survey confirmed the high price we all pay for the Government's policy decision to maintain and protect this State monopoly. Instead of acting in the best interests of Irish phone users, Telecom users and Irish business, the Government seems hell-bent on selling everyone short by hiving off a 20 per cent stake in Telecom to KPN-Telia at a rock-bottom price. That sale would copperfasten Telecom's monopoly on the sector by preventing any separation of Cablelink from Telecom. In many semi-States the Government's role as an owner conflicts with its duty as a regulator. There is no reason Telecom should encourage investment in a subsidiary to enable it to compete with its own core business. We all know monopolies do not function in that way.
My party is not alone in it's belief that Cablelink should be developed to provide competition to Telecom Éireann. A Forfás report published some time ago, entitled Shaping Our Future stated:
There is a good case for the sale of Cablelink to an independent network provider, subject to conditions on significant investment and upgrading in order to promote competition and new services.
That document was launched with considerable fanfare and the clear impression was given that it represented official Government policy. Yet, by including Cablelink in the sale of KPN-Telia the Government has moved in the opposite direction.
The amendment I am moving is to delete the word "by" in section 8(1)(b) thereby removing the Minister's power to buy shares back into the company. I support the sale of shares and the right to transfer them, but I do not understand why the Minister is seeking powers to buy shares back into the company when we are all seeking to have the company properly privatised.
In my party's view the right way to do that is to allow Irish investors and pension holders the opportunity to invest in Telecom by floating the company on the stock market. This was done successfully with Irish Life and Greencore. However, because of the Government's peculiar hue, it does not favour that route and is seeking another route which will hamper the company's ability in future. It has already frightened away eight or nine potential investors because of the manner in which the disposal of part of the equity in the company has been undertaken by way of this strategic alliance which is a nice way for socialists to say they will privatise part, but not all, of it. I am proposing that we remove the word "by" from line 17.
On a point of clarification are we speaking just to amendment No. 8, or to amendments Nos. 8 to 12?
The Deputy can speak on all five amendments, Nos. 8 to 12. Then we will put them separately.
Amendment No. 9 concerns a central issue. I am convinced time will prove me right in saying the deal which has been done by the Minister, Deputy Lowry, is scandalous. Some 20 per cent of the company is being sold for £183 million which is a derisory figure when one considers the purchasers will get back 20 per cent which will go into the company. They will also get 20 per cent of Cablelink and 20 per cent of Eircell for that £183 million figure.
Telecom Éireann's turnover is £1 billion and last year it showed a profit of almost £200 million. If depreciation is added the figure could be considerably above that. I consulted independent professionals Farrell White about what the company would be worth and was told the going rate in the telecommunications industry would be at least ten times a company's annual profits. That puts the value of Telecom Éireann, including Cablelink and Eircell, at almost £2 billion. Twenty per cent of that is £400 million but the Government has disposed of it for £183 million. We opposed this give-away, panic sale in the Dáil.
It was an EU-directed sale.
Deputy Molloy said nine or ten companies were in at the start of this race, and they were. We paid consultants approximately £5 million to pick one horse for a one horse race. Nice work if you can get it, particularly if you are a foreign consultancy company. I wish them well but I also wish more Irish consultancy companies could get that kind of work.
Lest there be any dispute, amendment No. 9 includes a lower figure of £300 million because I want the record to show that in a few months time when the usual British type of privatisation occurs here. I predict that when the State sells it off cheaply it will be sold on to people who will make large profits. For example, Telia is talking about being quoted on the Swedish stock exchange which means that investors will be able to buy into 20 per cent of Telecom Éireann there. Telia will able to unload its shares and make an enormous killing. The £183 million stake will be sold on within a couple of years, if not sooner, at a figure four or five times higher.
I strenuously object to the disgraceful and scandalous price of £183 million for 20 per cent. Who will benefit from this cosy deal? If it was to be Irish workers, pension funds or even Irish subscribers one may argue that it would come back to us. However, this is being sold, not as the Minister pretends, to some global giant who will bring us technology, but to two regional players. One is KPN in Holland and the other Telia of Sweden. They are no bigger or better than Telecom Éireann and they will not bring us any technology that we do not already have. They are good national operators in their own right but to present them as some sort of global players that will plug us into the whole world is downright disgraceful.
The 20 per cent stake will go to these two companies one of which is heading for the Swedish stock exchange, the other owned by the Dutch Government and no doubt heading for privatisation. We have a unique socialist type of privatisation which is brilliant. First, we exclude the Irish, give it away to foreigners at a knock down price and call it a strategic alliance. This is one of the most disgraceful decisions the Government has ever made. While I can understand Fine Gael standing over it, I cannot understand the Labour Party or Democratic Left doing so. The Minister may say the trade unions are happy with it and if I were in the trade union movement and was getting shares at the same price they are valued at here I would be delighted too, and so would the Minister. I do not blame the unions for not marching in the street about the price but it is the taxpayer who is being defrauded by this crazy decision. That is why I have tabled amendment No. 9 to see if we can have a rethink on the issue.
Amendment No. 10 is an alternative. How can the Minister value it when it is one horse race? I tabled this amendment so that an independent panel — including stockbrokers, valuers and others who understand the value of shares on the Exchange — would place a value on it. I do not know how it was valued when there was no real competition.
By consultants.
If the consultant charged £4 million or £5 million, maybe the Minister of State would tell me whether he said this was good value for money, and whether he checked with the industry or just looked up his files.
Amendment No. 12 concerns Dáil approval. The Government is inserting in the Bill a proposal that the remaining shares in Telecom Éireann above the 20 per cent — it probably comes down to about 9 per cent if one includes all that has been promised — can be sold without returning to the Dáil. This amendment seeks to force the Minister of the day to return to Dáil Éireann before shares are sold. The Minister is using a confidentiality clause to justify the Cabinet selling another chunk of the company in a one horse race without reference to the Dáil but I want to ensure that does not happen. Those are the reasons for amendments Nos. 9, 10 and 12.
Amendment No. 11 proposes to delete subsection (2). I do not agree with the way the Government is introducing competition to the telecommunications industry. The strategic alliance method will not achieve the optimum result for the taxpayer and in time Telecom workers will realise that the best option was not taken. A compromise has been reached because the rainbow coalition Government consists of two socialist parties, with an innate ideological opposition to the sale of State assets, and Fine Gael, which has traditionally adopted a policy in favour of privatisation. All these parties have been prepared to put their policies on the line to support this method, which is a mish-mash and a most unsatisfactory outcome.
The requirement in section 8(2) that the State would retain a share of more than 50 per cent in Telecom is the clause that frightened away the other investors who expressed an interest at the outset. We ended up with only one interested company, which has walked away with 20 per cent of our national telecommunications company, including Telecom, Cablelink and Eircell. Telecom is worth much more than the value Deputy Brennan placed on it in his amendment. Some £1.9 billion has been invested in the company over the past ten years, the company had a certain value at that time and when all its assets are added together, it must be worth far in excess of £2 billion. To give 20 per cent of the company away for the miserly sum the Minister is accepting is an utter, disgraceful scandal which in time will be seen as the greatest sell-out of an Irish asset by any Government.
It is beyond comprehension how the Government could have finally arrived at this position. Having frightened away many potential investors, the Government was left with only one and was on its knees. It did not withdraw the sale, as it was asked to do on numerous occasions. It paid £4.5 million to one company alone to advise it on the sale of the Irish telecommunications industry to one bidder. This is beyond comprehension and outlandish.
The Opposition parties will not be able to vote this down but there are people on the Government side, particularly members of Fine Gael, who should criticise this decision and vote against it, because this will be pressed to a vote. We now see that, unfortunately, Fine Gael is prepared to accept anything to stay in office. I do not understand how the Minister, the Minister of State and the three Government parties can justify this to the public as a good deal. Irish taxpayers, consumers, industry, business people and domestic users of the telephone system have all contributed to the development of Telecom. That investment has now been handed to a foreign company for a price far below its value, with an option to buy another 15 per cent at a later date. I am totally opposed to what the Minister and the Government are doing. Even at this late stage I ask him to pull back.
The Minister of State, Deputy Stagg, has been dealing with energy matters in the Department. Why is the Fine Gael Minister not here to explain this major sell out of an Irish asset, one of the companies with the greatest potential, given its monopoly in telecommunications? Information technology has vast potential for growth, profit and involvement in every aspect of Irish life and our economy in the future. The future will be based on information technology and this company will be pulling all the strings but we are selling 20 per cent of it now, with 15 per cent to be disposed of later, to two foreign companies which, as Deputy Brennan said, are not major players themselves. The idea of bringing in a partner——
I remind the Deputy that this is not a Second Stage debate. We are dealing with a specific amendment and I have given him——
I am dealing with the amendment. We are talking about the sale, which is speaking to the point.
We are getting into repetition now. The point has been made many times.
We are dealing with a sell out.
The Chairman may not like what I am saying but he should remain independent.
I am here to chair the meeting and I do not have to like or dislike anything that Members say. They are free to make their points but I am free to chair the meeting in accordance with the procedure and that is what I intend to do. I ask the Deputy to conclude.
It is legitimate to ask why the Fine Gael Minister who has been handling this matter and negotiated the deal is not here to explain it to us.
All I can tell you is that I was notified some time ago that the Minister of State, Deputy Stagg, would be taking the Bill. This is not unusual and I think as many Ministers of State as Ministers have come before this committee to take Bills. I ask the Minister of State to reply.
Is he not here because he is embarrassed about what he is proposing and the Bill before the House, which is a disgraceful sell-out?
I understand the Minister, Deputy Lowry, is abroad on Government business.
This is where he should be and he should organise his business elsewhere accordingly.
I do not propose to deal with what effectively is a rehash——
He will be remembered for this.
——of a succession of weak attempts by two parties who are now in favour of total privatisation of Telecom Éireann. Fianna Fáil adopted this position last week——
It is also Fine Gael policy.
It may well be but I do not propose to deal with that because it is a Second Stage matter.
Every country in Europe is privatising these State monopolies — Romania has privatised 56,000 companies.
I presume we can respond to that because that is not true.
What we are dealing with is essentially a technical Bill and I propose to deal with the amendments tabled in all good faith.
The Minister is living in the past.
We are moving into a political debate, for want of a better word——
It is a sad day——
Deputy Molloy has been doing this for a long time. He has not said anything new, he simply rehashed the same words over and over again.
——but we have got away from the amendments. Everyone has had a say so could we concentrate on the amendments? Otherwise I will put the question.
Amendments Nos. 8 to 12, inclusive, deal with section 8. Under subsection (1) the company may issue new shares and divide shares into different classes with differing rights in accordance with the Companies Acts, 1963 to 1990. The Minister for Finance and the Minister for Transport, Energy and Communications may buy, sell or otherwise transfer shares in the company. People who want to privatise the company will be happy the Ministers has these powers.
The Minister is selling it off to foreigners for nothing.
To what is the Deputy referring? People in the EU are hardly regarded as foreigners.
Subsection (2) provides that the aggregate shareholding of the Minister in the company should not be reduced to less than a majority of the issued share capital. A limit of £100 million is set on the amount of further shares for which the Minister may subscribe. Funds acquired by the Minister for this purpose must be paid from the Central Fund. Amendment No. 11 proposes to delete section 8(2) in its entirety and amendment No. 8 proposes to delete the word "buy" in section 8(1). These amendments would remove the provision regarding the retention of majority shareholding by the State and would also prevent the Minister and the Minister for Finance from subscribing for shares in the company.
The Government's policy on continued State majority shareholding in commercial State-sponsored bodies is clear and unequivocal. This position is given effect in the Bill in the context of the alliance transaction. The share subscription provisions in section 8 are designed to implement the alliance transaction. Their removal undermines the basis on which an investment of £220 million will be made in the company as a result of the alliance transaction.
Amendments Nos. 9 and 10 propose to insert new provisions in this section, providing that the price for the sale of 20 per cent shareholding in the company should not be less than £300 million and the minimum price should be the market value of the shares, as determined by an independent panel of experts, and shall take account of the value of any offer made for such shares in the three years. These amendments suggest that the sale of 20 per cent of the company can be separated from the rest of the strategic alliance transaction. It also proceeds on the basis that historic bids for equity in the company are made on terms far removed from the present transaction and valid as a basis for calculating the value inherent in the alliance transaction. It places effective jurisdiction over the disposal of State assets in the hands of stockbrokers. It chooses to ignore the value inherent in the strategic contribution.
The amendments are not a serious attempt to deal with the significant economic and strategic issues inherent in the alliance transaction. I am happy to defend the alliance transaction and I refuse to deal in the economics of unreality. The idea of basing a valuation for Telecom Éireann on a provisional offer made in the absence of competitive bids, without legal or regulatory agreement, based on a five year derogation and made three years ago is totally unrealistic. I do not accept the amendments.
I agree with the Minister's remarks about basing valuation for Telecom Éireann on a provisional offer in the absence of competitive bids. How many bids did he receive?
The successful bidder was not the sole bidder.
Are we entitled to know how many bidders there were or is it a secret?
I am not required to have such information with me as part of the discussion on this Bill. However, if the Deputy tables a question in the Dáil, he will get the information immediately, although he probably knows the answer already.
Why then can the Minister not give it to me now?
That is outside the discussion on the amendments.
It is not relevant to the amendments.
My amendment includes a figure of £300 million, but I believe it is worth much more than that.
The Deputy mentioned £400 million during the debate.
The sum of £183 million is ridiculous.
I do not agree.
I know that. Where did the Minister get the figure of £183 million?
That was the agreement.
Was it a tender?
We are getting involved in an argument.
Was this State asset put out to tender?
Those are questions for Question Time.
I am conducting the business of the meeting. The Deputy has asked a question but the Minister does not have the information. If the Minister so wishes, he can forward the information to the Deputy's office. He has already stated he does not have it with him. I propose we move on with our discussion.
I propose we adjourn until the Minister gets the information.
Even if the information was in my file it is not relevant to the Bill, therefore I do not have a duty to produce it today.
The Minister is answerable to the House.
The Minister is keeping it a secret.
I am not keeping it a secret. There are other ways of getting the information if the Deputy wants it. It is not relevant to this Bill.
The Minister has indicated he does not have the information and that it is not relevant.
I want to know if this State asset was put out to tender.
I propose we adjourn until the Minister gets the information.
I second that.
The Minister must make a decision on whether the information is relevant. However, there is nothing to stop Members from using other means to get the information, such as tabling questions which will be answered by the Minister.
We are discussing an amendment which deals with the sale price of the shares. The Minister mentioned how the price was arrived at. I want to know if there were tenders for this State asset and how the figure of £183 million was arrived at.
I did not say anything about how the price was arrived at.
We cannot move on until we know if there were tenders for this State asset.
I will be the judge of that. I will allow Members some scope but I will not allow them to usurp the right of the Chair. My job is to conduct the business of the committee. The Minister said he does not have the information and that he does not think it is relevant to this Bill. I accept what the Minister said in the same way I accept the Deputy's statement.
Last year the Minister for Transport, Energy and Communications, Deputy Lowry, lectured State companies about the need for tenders, particularly in relation to Horgan's Quay. As a result, every time a pencil and pen is needed in the State sector it must go out to tender. I want to know if 20 per cent of Telecom Éireann went out to tender.
I suggest the amendments should now be put or withdrawn.
There is a prior proposal from Deputy Molloy that we adjourn until we get the information.
I propose that the Chairman puts the question to adjourn.
I second that.
It is now 4.50 p.m. and we had decided to adjourn at 5 o'clock. I have five amendments to take and if they are opposed it will not be possible to complete the divisions in the time available because one amendment will take at least eight minutes. I will adjourn now and postpone taking all five amendments because once I take the first one I must complete all five in accordance with Standing Orders.
The Select Committee adjourned at 4.50 p.m. until 11 a.m. on Tuesday, 22 October 1996.