Can Enet’s McCourt use contacts to put broadband rollout back on track?


Can Enet’s McCourt use contacts to put broadband rollout back on track?

The departure of SSE from the tendering process is a further blow that leaves the State’s plan hanging in the balance

'Essentially it is a very expensive telecommunications project involving the connection of a very low-density population to some of the fastest broadband services available anywhere.
' Photo: Stock photo
‘Essentially it is a very expensive telecommunications project involving the connection of a very low-density population to some of the fastest broadband services available anywhere.
‘ Photo: Stock photo

The decision of SSE, the Scottish energy firm, to pull out of the tendering process for the National Broadband Plan (NBP) may have come as a bolt from the blue, but the signs were there. After all, the plan has been dogged with twists, turns and delays as far back as 2012, when the project was launched to much fanfare by the then Communications Minister Pat Rabbitte.

The NBP, the great hope for the large parts of Ireland with little or no broadband services, again hangs in the balance – even though the Government is adamant that SSE’s telecoms partner in the process, Enet, will submit a bid for the contract within weeks.

“We are still very confident we’ll have shovels in the ground by the end of the year,” a spokesman for the Department of Communications, Climate Action and Environment said. “It is an ongoing tendering process and we expect that Enet will submit a bid over the coming week. It is a complex process.”

The Government may be putting on a brave face, but it is in a bind. More than 500,000 homes and businesses in rural Ireland have been waiting for a solution to their broadband problems since 2012.

And Enet remains the sole bidder, without a strong partner in the form of energy giant SSE. After a slew of potential partners pulled out of the process, it is the last man standing.

Eir withdrew earlier this year but Siro, a joint venture between Vodafone and the ESB, also walked away from the process.

So one thing is for sure, none of the bigger partners or bidders were willing to stay in the game. The question is why not?

When Siro pulled out of the bidding process in September 2017, its reasoning was quite straightforward – it said, as a business case, it simply didn’t add up.

ESB chief executive Pat O’Doherty said at the time: “Siro’s withdrawal from the National Broadband Plan tender process was a difficult decision, it was made on the basis that Siro was unable to make a business case for continued participation in the process.

“With our partner, Vodafone, we now look forward to delivering Siro’s primary objective – to roll out a fibre broadband network with 1 GB capacity to 500,000 premises across 50 of the largest towns in Ireland where there is also a significant demand for high-speed internet connectivity.”

When Eir pulled out of the process more recently it cited the complexity of the tender process, as well as growing uncertainty over a range of pricing and regulatory issues outside of the NBP as its reasons for withdrawing. Eir is also key to the rollout of the National Broadband Plan even if it is no longer a bidder and it still has plenty of skin in the game.

Today, Eir is owned by a consortium led by French billionaire Xavier Niel. Niel’s NJJ Telecom Europe and French telecoms group Iliad took control of the firm at the end of last year. Eir, formerly known as Eircom, has taken on many different forms since then, from being a publicly floated firm, to being owned by private equity and, at one stage, it entered and exited examinership. The company may have had several owners over the past few decades but it managed to hold onto its network and infrastructure throughout the different sales processes.

If the broadband plan goes ahead, the winning bidder is likely to have to use part of the telco’s infrastructure to get at the 542,000 homes and businesses and they will have to pay for that access. In fact, a row erupted this time last year over charges Eir makes to other operators for access to its network including ducts, poles and cabinets.

Alongside bidders pulling out and numerous delays to the project, last year the plan was redrawn when Eir and the Government signed a deal and the intervention area was reduced to the 542,000 premises from an original 840,000.

As part of that deal, Eir took on about 300,000 premises from the plan which led to accusations of cherry-picking of the most commercially-viable homes and businesses and leaving rivals to service locations that were harder and more expensive to access.

“There’s only one winner in all of this and that is Eir,” said an industry insider who didn’t want to be named. “The losers will be the taxpayers and Government who will have to take up the slack if Enet can’t find another partner or if the whole thing collapses.”

Ed Storey, director of strategy and corporate communications at Eir, defended the company’s approach to the plan and said that obviously, from a business perspective, it wouldn’t make sense for the firm to pick the most expensive connections.

“Any other operator can access our network at a regulated price – it’s based on cost, we’re not making on any huge margins,” he said.

But councillor Alex White, who was Communications Minister from 2014 to 2016, said that Eir’s attitude was always that it was happy to build out services in the more cost-effective urban and easily accessible parts of rural Ireland but had indicated to him it would need “help” when it came to the more remote areas which is effectively most of Ireland.

“I think it was an error to reduce the size the size of the intervention area at the behest of Eir – that is classic cherry-picking,” he says. “It undermined the integrity of the largely rural intervention area that we had settled on,” he added.

Pricing aside, one of the other issues for Enet is that while it has experience managing networks, it lacks that experience building out networks – fibre broadband ones in this case.

Airtricity owner SSE would have been an ideal partner and would have plugged this gap, bringing experience and expertise to the table.

The company said in a statement: “SSE confirms that it is no longer a participant in the consortium bidding for the National Broadband Plan.

“We wish our former consortium partners and the Government well as they continue to progress discussions for the delivery of this important infrastructure project for Ireland.”

Enet chairman David McCourt added: “I can confirm that SSE has left the Enet consortium and that the consortium now comprises Granahan McCourt, John Laing plc and the Irish Infrastructure Fund.

“In building this consortium, we have brought together the best global expertise in building networks, particularly in telecoms, and in co-ordinating all of the elements required to finance a project of this size in partnership with government. To this we have added world-leading funds committed to the development of infrastructure around the world and to the NBP in particular.

“As I’ve said before, the process is very much on track. We’re just weeks away from submitting our final tender. The team is very focused on concluding the procurement phase of this project and moving swiftly into delivery.”

Enet has been on the go as a telecoms firm for 14 years. It is a wholesale provider and it also operates a fibre optic infrastructure known as the Metropolitan Area Networks (MANs) on behalf of the Government. These networks deliver bandwidth to 94 towns and cities across the country.

Last year, a majority stake in the firm was acquired by the Irish Infrastructure Fund (IIF), a joint venture made up of AMP Capital and Irish Life Investment Managers. The remaining 22pc is held by Granahan McCourt Capital which is led by McCourt as well as the private family fund of Walter Scott Jr who sits on the board of Warren Buffett’s Berkshire Hathaway.

No one in the telecoms industry underestimates McCourt and many believe he will deliver on the plan. He is a highly-successful telecoms entrepreneur and is involved in businesses across the globe, from the US to Saudi Arabia.

Looking back, though, it does appear that the approach to the plan was very ambitious from the Government side.

Essentially it is a very expensive telecommunications project involving the connection of a very low-density population to some of the fastest broadband services available anywhere.

It remains ambitious and the estimated cost of the rollout is €1.5bn – it will take an expected three-to-five years and hundreds of millions of taxpayers’ money as well as a commitment from the European Investment Bank and or funding from the winning private partner/s.

According to the plan, between 2017 and 2022 every home/business in Ireland would have a service of at least 30Mbps of mainly fibre optic broadband.

There are also fast upload speeds and uptime with weighty financial penalties if targets are not met.

“The whole thing is a mess,” said one industry source who did not wish to be named.

“Enet has experience running networks but not building them out.”

Whatever way you look at it, most recent developments don’t bode well for the Government, or the more than 500,000 homes and businesses in rural Ireland without broadband facilities.

But there still may be some hope and Enet and McCourt’s connections could come through.

“You can’t discount David McCourt,” said Ronan Lupton, chairman of the Association of Licensed Telecommunications Operators.

“He has strong connections with the US and further afield and might just be able to pull it out of the bag.”

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