IIU backing of bid ‘not known’

FINANCIER Dermot Desmond’s backing of Esat Digifone was not known to the civil servant in charge of the evaluation process when the Irish-led consortium won the second mobile phone licence, the Moriarty Tribunal heard yesterday.

Mr Desmond was mentioned nowhere in Esat’s licence application, which was examined by Martin Brennan and other top civil servants, who were assisted by Danish consultants Andersen Management International.

The tribunal heard the Department of Communications ignored a letter revealing Mr Desmond’s firm as a major backer of the bid two weeks after Esat’s successful presentation. Mr Brennan, in a covering letter drafted by a colleague, said the information it contained would not be considered as part of Esat’s presentation.

Mr Brennan yesterday said his colleague Fintan Towey returned the letter to Mr O’Brien. The letter was marked for Mr Brennan’s attention but he said he didn’t read it. The Department of Communications did not retain any copy of it, the inquiry heard.

Written by Professor Michael Walsh, a director of the Desmond-owned International Investments and Underwriting (IIU), the letter said the firm had arranged on behalf of the consortium to underwrite all of the equity not held by Norwegian telecoms firm Telenor.

Amounting to 60% of the equity, it included the 40% held by Mr O’Brien’s Communicorp group as well as IIU’s stake.

Originally, Communicorp and Telenor applied for the licence on a 50:50 basis. They undertook to reduce their stakes to 40% each if they secured the licence and to provide 20% of the equity to institutional investors.

Shortly before Esat got the licence, Mr Desmond actually had a 25% stake in the consortium. When the department insisted on the original shareholding configuration, Mr O’Brien and Telenor paid Mr Desmond £3.2m to buy back the extra 5%.

Mr Brennan admitted that three days before the licence was issued, he didn’t know the financial status of IIU Ltd. But when the information was supplied, the department was satisfied the company had the financial standing to meet its 20% commitment.

He agreed that at a meeting in the department with Esat personnel he framed three key questions that might be asked at the press conference in connection with Esat’s licence success:

Was this the same consortium as that which applied for the licence?

Can Denis O’Brien’s side of the consortium stand up?

Will Telenor support the project to the end?

No note of this meeting is on the department files.

Mr Brennan agreed it would have been preferable to have had a record but he didn’t see it as a major issue that one was not kept.