As Smart Telecom enters into a 100-day examinership process,it also confirmed that one or more third parties are still interested in buying the business.
John McStay, of McStay Luby Chartered Accounts has been appointed as the Interim Examiner for the company by the Irish Commercial Court. Smart owns up to 40 unbundled telecoms exchanges and has considerable fibre assets around the country.
The initiation of the process follows the conclusion of an extensive six-month strategic review by the company’s financial advisors, Collins Stewart, that revealed significant expressions of interest in the company.
Smart says it is currently in advanced discussions with a small number of third parties who have expressed interest in acquiring the entire customer base and assets of the company.
Smart intends to utilise the examinership process to finalise the terms of an investment or merger with one of the interested parties.
“Smart received significant interest from a variety of domestic and international telecoms companies in acquiring the customer base and assets of the company,” it said last night.
“As part of the review process, however, it became clear that Smart remained burdened by a range of legacy liabilities which inhibited the ability of the company to conclude a transaction or raise additional financing, particularly in the context of the current global financial crisis.
“The board of directors and the company’s largest secured lending group have determined that in order to execute a transaction, which is in the best interest of the company’s customers, employees, creditors and shareholders, Smart should enter an examinership process to address the legacy liabilities within the business,” it said.
The examinership process is designed to result in a court approved scheme of arrangement and a Final Investment Agreement and is limited by law to 100 calendar days.
“Given the advanced stage of negotiations with third parties, the process is expected to conclude ahead of the 100 day time period,” Smart said.
In the early part of this decade under the leadership of Oisin Fanning, Smart made a robust entrance to the Irish fixed line market place, 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 €4m 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 license.
The company was taken over from founder Fanning by businessman Brendan Murtagh after it racked up losses of €55.6m.
Murtagh subsequently raised €39.5m to repay creditors. However, it is understood that the company has incurred further trading losses and is unlikely to achieve profitability and positive cashflow and this year laid off 60 of its 90-strong workforce.
Last night Smart’s owners said the operator has a national reach and operates the only ‘Next Generation Network’ (‘NGN’) in the country making it Ireland’s most advanced broadband provider.
Smart currently serves approximately 12,000 residential and 500 corporate, government and medium sized business customers throughout Ireland.
The company said the examinership process should have no impact on the underlying Smart business which will continue to provide high quality services to its growing customer base.
Over the weekend, Smart’s rival Magnet, which also has invested considerably in LLU and fibre network hit out at the anti-competitive market conditions and regulatory framework that allowed Smart to fall into the difficulties it found itself in.
“The slow pace of reform of regulation has ensured that only the best funded companies can survive and compete against the incumbent,” said Magnet Networks’ CEO Mark Kellett.
“With the financial backing of its parent CVC, Magnet has been able to build out the largest alternative LLU network in the State, but it is obvious that other operators without this investment may be at risk from a poorly regulated market. We call on the Minister to immediately examine the market in the context of today’s announcement from Smart.
“ComReg and Minister Ryan have recognised the need for Next Generation Networks (NGNs) as a means of encouraging inward investment into the economy. Without a fair and competitive telecommunications market there is little incentive or ability for alternatives to invest in this infrastructure. The basis for healthy competition lies in the application and enforcement of appropriate regulation designed to facilitate competition,” Kellett said.
By John Kennedy
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