IT WAS the most lucrative licence ever awarded by the State, the most contentious, and after yesterday, it might well turn out to be the most expensive.
The saga of the awarding of the second mobile phone licence continues. Yesterday, the Supreme Court ruled that two of the losing bidders for the licence can now take an action against the State alleging that the process was unfair and improper. Both entities are claiming damages. If either or both are successful, the cost could run into tens if not hundreds of millions.
The licence was awarded to Esat Digifone in 1995. Esat was headed by Denis O’Brien. Among the losing bidders were two consortia, Persona and Cellstar, which, in various guises, are pursing the current action.
Persona is an outfit put together by Irish businessman Tony Boyle. Cellstar was fronted by well-known businessman Declan Ganley.
Persona included Sigma Wireless, a company owned by Boyle and his partner Michael McGinley; US telecoms giant Motorola; a group of Scandinavian mobile operators; and ESB, which had a 20% share.
At the time, Persona was seen as one of the favourites among the five main bidders. Persona, now wholly owned by Boyle and McGinley, is suing the State on the basis that the competition was effectively rigged.
Comcast is the other litigant in the current proceedings. This company was brought into the Cellstar consortium by Declan Ganley. Bord Na Móna and RTÉ held small stakes in Cellstar but neither are involved in the current proceedings. Comcast is also including Esat and O’Brien in its action for damages.
The awarding of the licence has been contentious since soon after the winner was announced. O’Brien was something of a surprise victor. As a young Irish entrepreneur at a time when the economy was taking off, he was seen as representing a new breed of native businessman. The losing bidders were not so sanguine. Plenty of noises were made about how the competition was run, but their concerns were largely treated as sour grapes.
The licence was sold for £5m, and within a year valuations put it at up to £60m. In 2000, O’Brien sold Esat Telecom for £2bn, pocketing £250m from his share. He went on to start a mobile phone business in the Caribbean which has proved to be highly successful, elevating his wealth north of €1bn.
Meanwhile, in late 1996, Michael Lowry, who was minister for communications when the licence was awarded, was unmasked as a kept man. A story about Ben Dunne funding an extension to Lowry’s Tipperary house forced him from cabinet, and eventually from Fine Gael.
Lowry found himself ensnared in the Moriarty Tribunal. In the wake of a series of newspaper reports, the tribunal expanded its remit to investigate the awarding of the mobile licence. In 2001, as media reports about Lowry and the licence kept coming, Persona and Comcast launched legal actions.
The State, in turn, resisted. In 2006, it won a High Court action to prevent Persona and Comcast going any further with their action, on the basis of undue delay. The two litigants, for their part, insisted the action could only proceed after the Moriarty Tribunal had finished its work.
Moriarty reported last year that Lowry had given “substantive information to Denis O’Brien, of significant value and assistance to him in securing the [mobile phone] licence”.
O’Brien and Lowry have always denied anything improper was done in the awarding of the licence. Both men were highly critical of Moriarty’s work, and some elements of the tribunal’s modus operandi were controversial. Most notably, Moriarty criticised several public servants in his provisional findings, but this did not feature in the final report.
After the High Court ruled against Persona and Comcast in 2006, an appeal was lodged immediately. It has taken six years for the case to be ruled on by the Supreme Court. The exact details of the judgments will be poured over when they are published.
The outcome of the Moriarty Tribunal is a fillip for the two litigants, but is certainly no guarantee of success in the High Court. While the standard of proof required would be the same — “a balance of probabilities” as opposed to the higher “beyond a reasonable doubt” — the court might well approach the case differently to how it was handled in Dublin Castle. O’Brien has always said he would welcome any challenge as he is confident that no court would rule that there was any interference in the awarding of the licence.
AFTER pursuing the action for 11 years, the two litigants will be slow to give up now. They will require deep pockets. The evidence to the Moriarty Tribunal on the licence was extensive, and it can be expected that any legal action is likely to drag on, possibly for years. Both sides will retain the law library’s biggest guns and the costs could go into overdrive.
The other possibility is that the State will settle the case. The prospect of a long running action with its attendant publicity may be deemed too high a price to pay, irrespective of the chances of a successful defence of the action. If the State were to settle, it would effectively be an admission that something untoward happened, but then Moriarty has already ruled that to be the case. There is little or no prospect of O’Brien settling.
And so on it goes. Seventeen years on from when the licence was awarded, controversy continues to stalk the process, the minister involved and the winner.
It was the most lucrative licence ever awarded by the State, and developments in the coming months will determine whether it was also the most expensive.