Desmond gave us what we wanted, says former Digifone director

FINANCIER Dermot Desmond “gave us what we wanted” when he agreed to underwrite 60% of Esat Digifone, former consortium non-executive director John Callaghan told the Moriarty Tribunal yesterday.

Mr Callaghan described how he was asked by former Digifone chairman Denis O’Brien to contact Kyran McLaughlin of Davy Stockbrokers in the summer of 1995 to get financial institutions to become involved, in the event of the consortium winning the competition for the country’s second mobile phone licence.

By September 29, 1995, Mr O’Brien had agreed a deal with Mr Desmond’s International Investment & Underwriting Ltd (IIU).

Mr Desmond’s company would underwrite the Irish side of Digifone, approximately 60% of the total equity, as well as acquire 20% of the equity originally intended to be placed with financial institutions.

Tribunal lawyer Jacqueline O’Brien BL asked why the financial institutions were not told of the Desmond offer and Mr Callaghan said it would not have been fair to tell them they were being set aside because the consortium had secured a much better deal.

“It would be most unfair for me to go in and say ‘I now have a better deal. You wouldn’t give it to us first time out but now I have this deal, I give you a chance to step up to the plate’,” said Mr Callaghan, a former managing partner of KPMG Accountants.

He said Denis O’Brien brought in Mr Desmond because he felt he was “more flexible and smarter” than the more established financial institutions. “IIU had set themselves up in competition with the established financial business area, and Davys would be very much a part of that,” he said. Ms O’Brien contended it would have been equally embarrassing for Davys to go to the financial institutions some time after September 29 to ask them to step aside and then to discover 25 days later Esat Digifone had won the mobile phone licence “I don’t see that as embarrassing at all,” said Mr O’Callaghan. “These are very grown-up people. They were asked. If they really believed in us they would have said ‘no, we’re not standing aside’. But they didn’t.”

In a letter to the Department of Communications, dated September 29, 1995, IIU said: “We confirm that we have arranged underwriting on behalf of the consortium.”

Asked to comment on the letter wording, Mr Callaghan said if he had read the letter quickly he could think the underwriting had been arranged with a third party, not IIU. But he always believed IIU were “on the line” as financiers for the consortium.

Denis O’Brien is due to resume his evidence to the tribunal next Tuesday.