Four major cable companies have accepted the new licensing regime set out by the Office of the Telecommunications regulator. Last night (13 January) Princes Holdings, which is jointly owned by Independent Newspapers and US company TCI, agreed in principle to the new licences set out by the Office. Only Suir-Nore Relays in Kilkenny have failed to respond to the regulators offer to date
Serious tensions arose earlier last year over Etain Doyles (the Director of the Office of Telecommunications Regulation) proposal to end their monopolies and an assertion in "The Future of TV Transmission", a report recently issued from her office, that existing cable and MMDS licences do not authorise the carriage of digital services. The cable operators disputed this and said they would challenge the regulator in court if there are any amendments to their licences at the time
Doyle asked the 15 cable companies to submit business plans and reasons why they should be granted new licences. She wanted to introduce competing services in each geographical area and have access to all for digital services such as video on demand, fast internet and on-line shopping.
Under the terms of the new licences issued operators would be offered exclusivity on their particular platforms for five years only. The licences would be granted for 15 years. The regulator had set next Monday as the deadline for the acceptance of the terms by the industry. In a document issued on the 23rd of December, Ms Doyle said that if the operators did not indicate their willingness to surrender the existing licences in favour of the draft regulations she would "initiate or continue as appropriate in each case, legal action to establish what rights if any, existing licensees have" regarding exclusivity or renewal of licences.
The operators were unhappy with some of the terms of the offer such as the 3.5% levy on the licence fees they charge customers for basic and premium services and also that the new licences do not offer them what is known as a 'return path' which would be best facilitate by an allocation of radio spectrum. The radio spectrum is a scarce resource and is essential for the provision of interactive multimedia services which is essential for investment plans as it is a key source of future revenue. Cable companies were also objecting to short term licences for illegal deflector companies. Some cable companies are suing the state for its failure to close down the deflector groups who have been selling services in areas where cable companies are licensed to operate. But smaller TV deflector groups will now have to pay royalties and taxes as well as having to contend with reduced access to the radio spectrum as digital services are rolled out which could but smaller groups into serious financial difficulty.
The agreement of cable companies to enter negotiations about fully agreeing to new licences will also clear the way for the sale of Cablelink. Resolving the issue was essential before the sale of Cablelink could go ahead, which had already been delayed by several months. Cablelink was set up 30 years ago and is 75% owned by Telecom Eireann and 25% by RTE. Both semi-states have been instructed to sell their holding to facilitate greater competition in telecommunications. Dublin-based firm of solicitors, Arthur Cox, was appointed as legal advisors to Telecom Eireann and RTE on their shareholdings and is working with British investment bank NM Rothschilds & Sons which was appointed financial advisor to both shareholders.
Rothschilds, whose appointment signals a strong overseas interest in Cablelink's cable TV and MMDS network in Dublin, Galway and Waterford has a lot of experience and contacts in the international telecommunications market and is a key advisor in the alliance between British Telecom and AT&T (see related articles). It was also the leading corporate finance house in the world last year in driving mergers and acquisitions in the telecommunications sector. Analysts predict that the company could make £230 million balancing the cost of upgrading Cablelinks old cable network estimated to be a possible £150 million against very high penetration in the greater Dublin area of 330,000 subscribers valued at £1,000 per connected house (based on UK valuations). Also much of the value of Cablelink lies in the potential for its network to be used for telecommunications than the traditional TV channel business. It recently announced a major new initiative which will see it enter the Internet market and could see it become a dominant player in that industry
The sale of Cablelink is itself a vital precursor to the £1 billion floatation of Telecom Eireann scheduled for June of this year. If the issue of new licences had descended into long running legal battles it could have completely derail that time table.
Michael McMahon 14/1/99
