Civil servants grossly underestimated potential mobile use

SENIOR civil servants grossly underestimated the number of mobile phones that would be sold in Ireland when awarding to second mobile phone licence to Esat Digifone.

While most people in the State have a mobile phone, it was thought at the time that only about 45,000 customers a year would sign up.

The tribunal which is beginning a long and detailed probe into how the second mobile licence was granted to Denis O'Brien's Esat Digifone in 1996 heard there are now close on three million units in circulation.

But in the mid-1990s, analysts though the market would be considerably smaller.

Senior civil servant Martin Brennan, who headed the team that evaluated the contenders for the second GSM licence seven years ago, spelled out the success of the mobile phone in recent years.

"Analysts who suggested a 30% penetration by the end of the decade were sometimes derided for their optimism," Mr Brennan recalled. "When I first spoke to Alan Corbett of Eircell, he talked about a great little business for 45,000 customers growing in double digits and with the highest revenue per capita of any such service in Europe." It was against this background in the mid-1990s that a cap of £15m was set on the cost of the second mobile phone licence.

Mr Brennan, now assistant secretary in charge of energy in the Department of Communications, was a principal officer at the time of the GSM licence competition, in charge of telecommunications development. He proposed the £15m cap.

Mr Brennan told the tribunal yesterday that former Communications Minister Michael Lowry was furious with him when he heard the EU wanted to postpone the awarding of the licence while they sought more information.

This meant a new closing date had to be fixed for receiving applications for the GSM licence.

Asked to explain his reference to Mr Lowry, Mr Brennan said: "Most politicians don't like unfavourable coverage in the Sunday papers in particular, and this thing was happening on the Thursday or a Friday.

"When the notice went out fixing a new competition date there were some follow-up queries to the department about the details and his (Lowry) anger was coming down the phone line at that point."

Mr Brennan said he proposed a fixed £10m fee on Eircell and a cap on bids for the second licence at £15m in mid-1995 as a pragmatic response to the EU Commission concerns as well as taking the State's own budgetary requirement into account.