Inquiry told of O’Brien row with Desmond

FOUR days before Esat Digifone got the licence to run the country’s second mobile phone network, businessman Denis O’Brien threatened legal action against financier Dermot Desmond, the Moriarty Tribunal heard yesterday.

Digifone solicitor Owen O’Connell recorded the details of the “hardball” negotiations between Mr O’Brien, who headed the consortium, and Professor Michael Walsh, managing director of Mr Desmond’s International Investments and Underwriting (IIU).

Mr O’Connell’s cryptic note recorded Mr O’Brien telling Professor Walsh he no longer trusted him or Mr Desmond and “will seek an injunction to block signing of licence”. IIU held a significant minority stake in the consortium and was a major underwriter.

The negotiations dealt with the ownership make-up that would apply after the consortium received the GSM2 licence.

In their joint application for the licence, Mr O’Brien’s Esat Telecom company and Telenor of Norway said they would set aside 20% of the equity for named financial institutions.

Mr Desmond’s involvement was not revealed to officials until a month before the licence was granted, when it emerged his company held a 25% stake. The previous September, Mr Desmond's IIU had offered to underwrite all of the Irish exposure in return for being allocated equity intended for financial institutions.

As negotiations drew to a close, Department of Communications officials made it clear to Digifone representatives that Mr Lowry had a “very strong preference” that the consortium revert to the original ownership, where Mr O’Brien's company and Telenor each held 40% of the equity with 20% set aside for institutional investors.

When Telenor and Mr O’Brien went to buy back the extra 5% held by Mr Desmond, Mr O’Brien wanted four months’ grace before he paid his share of this and sought money from IIU for the purpose.

During the argument, Professor Walsh reportedly conveyed Mr Desmond’s attitude as follows: “If Denis wants something in writing, he doesn't trust me and he can f... off.”

Professor Walsh warned Mr O’Brien he had enormous bridges to rebuild “if he wants to get anything from DD”. He gave Mr O’Brien Mr Desmond’s phone number and urged him, “if he has any sense”, to ring within 20 minutes and apologise profusely.

Mr O’Brien made the phone call.