Dáil Éireann díospóireacht -
Wednesday, 6 Dec 1995

Vol. 459 No. 4

Adjournment Debate. - Telecom Éireann Strategic Alliance Initiative.

Mr. S. Brennan

I protest at the absence of the Minister for Transport, Energy and Communications. I say that with no disrespect to the Minister of State, Deputy Deenihan, who will kindly take this matter. However, I fail to see what the Department of Agriculture, Food and Forestry has to do with the serious matter I am raising this evening and I trust my protest will reach his ears.

I wish to discuss the mounting concern about the Government's handling of negotiations at Telecom Éireann in its search for a strategic ally. One company, United States West, has withdrawn from talks and it is reported that another company, British Telecom, is considering pulling out of the negotiations with the Irish authoirities. The withdrawal of these two potential partners is most disturbing and reflects the concern of major telecommunications multinationals at the manner in which they are being treated by the Minister for Transport, Energy and Communications. The companies lack confidence in the Minister's handling of the negotiations which are clouded in secrecy. The Minister has delayed the process unnecessarily. After 18 months, the short-listed companies have still not got the memorandum of information outlining the terms of an alliance. How can an alliance proceed when the relevant documentation has not reached potential partners 18 months after the announcement? Can you blame two potential partners for walking away?

Problems have arisen because the Government has been pulling in three different directions. It is widely known in Telecom Éireann that the delay on this matter is because the Labour Party has a different view from the Democratic Left Party on how to sell off 35 per cent of a State company. I have noted on many occasions that if this side of the House attempted to sell off one-third of a State company, the Democratic Left Party would be apopletic but now we have silence — perhaps the few bob for social welfare is the pay off for that silence. The Fine Gael Party and the Minister for Transport, Energy and Communications are pulling in another direction. There has been no resolution of these difficulties and as a consequence we have seen the withdrawal of United States West and the threatened withdrawal of British Telecom.

This three way political tug of war is bad for Telecom Éireann and the country because good telecommunications are central to the national interest. Any more delay in advancing the Irish telecommunications system will cost this country thousands of jobs as companies simply will not locate here. This delay has already cost us jobs. Last week Stream International, a major multinational announced a 500 job facility for Derry city, whom I heartily congratulate for winning that project. The company is publicly quoted as saying that if Telecom Éireann had an international partner the plant would have come to the Republic. The key to Derry's success was that it could supply the essential telecommunications network through British Telecom's deal with the United States carrier MCI. Stream International has warned that another 200 jobs which it is considering locating here could also be lost if Telecom Éireann does not make up its mind in the next four months on its strategic partner.

I have been concerned at the way the Minister for Transport, Energy and Communications handled these negotiation and those for the second mobile phone licence. The Minister is trying to do his work behind closed doors and has refused to publish consultants' reports which I have demanded consistently from these benches. He has refused to give me position papers and time and again he has refused to come into this House and debate the issue in any serious way. I call on the Minister to lay out clearly what his Government's position is on the strategic alliance for Telecom Éireann.

There is urgent need for the production of a White Paper on the semi-State sector so that we can have a coherent, integrated strategy for these companies rather than the ad hoc, week by week, policy shifts that prevail.

We need some clarity on where Telecom Éireann is going; two companies were in negotiation, one has pulled out and another is in the process of doing so. There is too much secrecy. Arguably Ireland's largest company is not being told where it is going and its subscribers do not know whether they will have a role to play in its future. There is total confusion, no clear strategic vision and that is not good enough.

Minister of State at the Department of Agriculture, Food and Forestry (Mr. Deenihan)

I apologise for the unavoidable absence of the Minister this evening — he has been present for adjournment debates on several occasions over the past 12 months.

Fine Gael was the first party in this House to suggest a strategic alliance with Telecom Éireann and that was opposed by Deputy Séamus Brennan's party at the time. I remember some of its councillors bringing deputations into Kerry County Council, of which I was a member, to oppose any such alliance. It is great to observe that party coming around to our way of thinking.

The process of selecting a strategic partner for Telecom Éireann is well under way. The Minister welcomes this opportunity to outline the current position in this process. The Minister would like to emphasise at the outset that major progress continues to be made. At the same time we must recognise that this issue is complex and it is vital that we get it right. Arguably this is the biggest single transaction affecting a State-sponsored body in the history of the State.

To put things in context I would like, to outline briefly the background and the steps that have been taken to get us to where we are. First, it has been generally accepted for some time that a strategic partner is vital to Telecom Éireann's future. The right partner will bring many benefits, including management, marketing and technological skills to Telecom Éireann. In addition, a partner will help provide access to a world-wide network platform. This is essential if Telecom Éireann is to protect its international customer base and sustain and grow revenues from a sound financial base.

These changes are necessary so that Telecom can thrive, and be a major player in the future competitive environment. Given the critical importance of telecommunications to economic development, this is vital, not just for Telecom but for Ireland's future competitiveness.

The first step in this process was taken with the release of the mandate for negotiations approved by the Government in July of this year. This document cleared the way for the commencement of the process of choosing the right partner. It addressed a number of key policy issues the most important of which sets our our national policy objective for telecommunications. This is to achieve a telecommunications sector which is in the upper quartile of OECD indicators on price, quality and availability. This is an ambitious target but one that we believe is achievable. In addition the mandate states the Government's intention to achieve a fully competitive market by the year 2000.

The mandate lays down that an incoming partner must help us achieve our overall objective. The partner must show long-term commitment and assist Telecom in being a major player while remaining in majority public ownership. To cement the relationship between the partners up to 35% per cent of equity of Telecom may be issued to the right partner and a further 5 per cent may be set aside for staff, subject to certain conditions.

Since the release of the mandate document the selection process has formally commenced. This process will be totally fair, impartial and objective while at the same time ensuring that the State gets the best possible deal. To guarantee that these objectives are met we have appointed, through a competitive process, a top class consortium of consultants headed by Morgan Stanley to advise the shareholder. This consortium provides the necessary financial, legal and telecommunications expertise to carry out this assignment.

In addition, a management structure under the auspices of the Minister's Department has been established to carry out the selection process and this includes, representation from the Department of Finance and Telecom Éireann. The top layer in this structure is the project management group which is responsible for the overall direction of the project and for the final recommendation of a partner to Government.

The day-to-day management of the project will be the responsibility of a joint project team. The Minister has also requested Telecom Éireann to ensure effective and open communications with its staff representatives on the alliance process.

The two Departments and Telecom, together with their advisers, have been-working towards the first milestone in the selection process which is the issue of the information memorandum to the potential partners. This document will provide a comprehensive description of Telecom and will set out the shareholder's and the company's objectives from the alliance. It is intended to issue this document shortly and this will signal the effective commencement of the selection process. Potential partners will be given some weeks to consider this documentation and to respond with preliminary proposals for an alliance.

A shortlisting process will then take place leading to detailed negotiations with a number of companies. Overall the process could take about nine months to complete. The Minister is hopeful that we will have identified the successful partner by the middle of next year. This is not unusual for a process of this type and the Minister is committed to ensuring that the process continues to move smoothly and without delay.

I have given this detail about the process in order to demonstrate the progress that has been made not withstanding the complex issues which need to be considered and the overall importance of this project to telecommunications in this country. All of the potential partners have been contacted and are aware of the current position.

Reports that British Telecom is reviewing its position as far as the Minister is concerned are speculative. As Deputy Seámus Brennan said, there is no evidence to suggest any imminent decision by British Telecom to pull out.

Mr. S. Brennan

There is.

Mr. Deenihan

The Minister has not received any information or indication that these reports are true. British Telecom, like all the other potential partners, is fully aware of the progress that is being made and fully understand the nature of the process. Indeed, the Minister is very satisfied with the quality of the interested companies. All are major telecommunications operators with significant potential to contribute to Telecom Éireann's strategy and operations.

The Deputy quite rightly recognises that jobs are a factor in this overall process. Indeed, the mandate states quite clearly that the capacity of the partnership to give access to additional business development and job opportunities will be an important consideration. The Minister would like to make it clear that this process is on track and that the objective in the mandate relating to jobs has not been put at risk.

The Minister is satisfied that this selection process, vital both to Telecom Éireann and the telecommunications sector, is on target and making significant progress.

The Dáil adjourned at 9.30 p.m. until 10.30 a.m. on Thursday, 7 December 1995.