Digiweb investment to rescue Smart from examinership

5 Nov 2009

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It has just emerged that troubled telecoms firm Smart is to exit examinership after telecoms rival Digiweb agreed with the examiners to make an investment in the company.

Digiweb intends to acquire the entire customer base and assets of Smart. The investment by Digiweb, which is subject to approval by creditors and the Irish High Court, enables Smart to emerge from a period of examinership and to form part of the Digiweb Group.

Digiweb said today that the proposed combination would enable Digiweb-Smart to offer digital communications services to 100pc of the country’s business and consumer population.

What the potential merger means

The potential merger combines Smart’s fibre, high-speed DSL infrastructure and next-generation IP network with Digiweb’s date centre and hosting platform, and national wireless infrastructure.

This will give both companies a total subscriber base of 46,500 business, residential, corporate and government customers for broadband, data and telephony, along with more than 48,000 web hosting, domain and data-centre clients.

Digiweb managing director Colm Piercy said the move brings together two EBITDA positive businesses with annual revenue approaching €40 million and more than 150 employees.

"We are excited about the possibilities of combining the Smart business with our own company and national service offering,” Piercy said.

“We see very strong advantages for the combined customer base, who would see a major upgrade in the range of services that they can access from a single truly national provider. Together we can grow strongly in business, consumer and public-sector markets.

"This would make the Digiweb Group one of the largest Irish-owned telecommunications companies, and give us the network, people and managed services capability to provide real choice to the Irish telecommunications market,” Piercy added.

Digiweb Group’s Smart part

Under the proposal, Smart will form part of the Digiweb Group, will retain the Smart brand and will continue to build on its position as a leading provider of voice, data and managed communications and data-centre services in Ireland.

Smart entered the examinership process on 31 August, 2009, in order to restructure its balance sheet and to secure a strategic investment. The investment by Digiweb is expected to be finalised by the beginning of December 2009.

Smart serves about 12,000 residential and 500 corporate, government and medium-sized business customers throughout Ireland.

“The truly national scale and resources of the combined company would allow us to expand our product offering and service capabilities to our existing combined customer base,” said Brendan Hunt, CFO, Smart Telecom.

“We look forward to making a very positive contribution to the competitive communications landscape in Ireland,” Hunt added.

Background

In the early part of this decade, under the leadership of Oisin Fanning, Smart made a robust entrance to the Irish fixed-line marketplace, unbundling up to 40 local exchanges and signing up close to 50,000 fixed-line customers and 18,000 broadband customers.

Failure to pay a €4-million bill to Eircom in 2006 saw the incumbent cut off its fixed-line service and soon after it lost its status as preferred bidder for Ireland’s fourth 3G licence.

Businessman Brendan Murtagh took over the company from founder Fanning after it racked up losses of €55.6 million.

Murtagh subsequently raised €39.5 million to repay creditors. However, the company incurred further trading losses and it became unlikely to achieve profitability and positive cash flow. Earlier this year it laid off 60 of its 90-strong workforce.

By John Kennedy

Photo: Digiweb’s managing director Colm Piercy.

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com