Given the god awful mess the National Broadband Plan is now in, it is worth reviewing the strange tale of the Metropolitan Area Networks and eNET – a tale we are now involved in via FOI litigation….
A few things to remember:
The MANs are State-owned and were paid for with Irish National Development Plan (NDP) and EU money. Enet initially won two 15 year contracts – in 2004 and 2009 – to operate and manage the MANs on the State’s behalf. The National Broadband Plan (NBP) is a separate and newer plan to deliver broadband to rural areas, and is the biggest contract in the history of the State. The eNet consortium is the final bidder.
August 2003 – Bidders start submitting tenders in the race to manage the first phase of MANs. They include Data Electronics, Axia and eNET. The tender will be awarded for 10 years to manage the phase 1 €65m State-owned fibre rings. Axia’s bid was submitted via Axia Ireland, which was 10 per cent owned by food group IAWS. Data Electronics, a Dublin-based firm owned two internet data centres in Dublin. Enet is linked with Michael Tiernan Properties in Limerick.
“Domestic telecoms firms such as Eircom or Esat BT were not allowed to bid for the contract, which has limited the amount of bids submitted. Under the rules of the tender process, no holder of an Irish telecommunications licence could apply for the contract to manage the Government’s fibre network. Mr Ahern said this decision was taken to “stimulate the market appropriately”.
January 2004 – A consortium led by Limerick-based property developer Tiernan Properties is selected as preferred bidder for a contract to manage the State’s MANs. It also includes a spin-off from Eircom, called TE Services, and Swedish company Swedia. “The contract to manage the State’s telecoms assets is believed to be worth several million euros over a 10-year period.”
May 2004 – Enet is backed by ACT Venture Capital. Eoin O’Driscoll, managing director of consulting firm Aderra and former head of Lucent Ireland, confirmed he would take up a position as chairman of eNet. ” Mr George McGrath, the former chief executive of Ocean – a telecoms joint venture between British Telecom and ESB – will join eNet in a senior post, probably as chief operating officer.”
June 2004 – “In a statement today the Minister for Communications, Marine and Natural Resources, Mr Dermot Ahern said the Regional Broadband Programme would bring a high speed communications network to an additional 350,000 people. This investment follows the investment of €65 million into rolling out the service in 26 large towns and cities. The Department will now issue a Call For Proposals to the local authorities over the next few weeks. Construction work is due to begin the autumn. The work is expected to last 12 months.”
February 2007 – “The State’s €200 million broadband network is set to generate about €6 million in revenues by the end of its current financial year.”
October 2007 – “”We will break even in the 12 months,” Conal Henry says. “Our financial performance is in line with the business plan we submitted when we won the contract.”
January 2008 – Eoin O’Driscoll appointed to the board of The Irish Times Ltd
May 2008 – Enet signs a €3 million deal with BT Ireland for the supply of backhaul connectivity.
June 2008 – “E-net, the company contracted to run the Government’s metropolitan area networks (MANs) in 27 towns, has emerged as the preffered bidder for a second contract to manage the network in 66 additional towns.” In the year to April 2008 E-net reported an earnings before the deduction of interest, tax and amortization expenses loss of €0.5 million on revenues of €7.2 million. Conal Henry said he expected the company to be profitable “before the end of this calendar year” and that revenues by April 2009 should reach €10 million. This projection does not assume the securing of the phase II contract.”
April 2009 – “E-net, the company that manages the Government’s metropolitan area networks (MANs) in 27 towns around the State, has signed a €17 million deal with Vodafone Ireland to provide high-capacity fibre optic connectivity.”
July 2009 – “E-net, the company contracted to run the Government’s metropolitan area networks (MANs),has won a second contract bringing the number of towns in which it is managing the service to 93. Under the second phase contract E-net will manage the networks in an additional 66 towns, ten of which are already active. These include Tralee, Killarney, Navan, Longford and Bundoran.”
September 2009 – “THERE IS “little prospect” of a significant monetary payback for the State’s €176 million investment in fibre optic telecommunications networks in regional towns and cities, the CAG has concluded.. E-net, the private sector firm which has a 15-year concession to manage, maintain and operate the Man returned €805,000 to the State in 2008, through a revenue share agreement and investment in the network. The department was paid €233,517 and this was split 50/50 with the local authorities who paid 10 per cent of the costs and managed their construction.”
August 2010 – “Telecoms firm E-net said revenue rose 49 per cent in the year to April 30th 2010, and posted a profit for the first time. The company, which also runs the State-owned metropolitan area networks, reported turnover of €13.9 million for the year, from €9.3 million in the previous year and the sixth consecutive year of double digit revenue growth. E-net posted its first full-year profit at €1.7 million after tax. This compares to a loss of €900,000 a year earlier.”
A critical juncture. Enet sells itself, ending the involvement of Tiernan et al.
September 2013 – “ENet, the company that has been bringing internet access to urban centres around the State, has been acquired by a consortium of international investors for an undisclosed sum.The consortium comprises Granahan McCourt, a US-based telecommunications investment and development company run by Irish-American entrepreneur David McCourt; Walter Scott, a member of the board of Warren Buffett’s Berkshire Hathaway who has invested through a private family trust; and London-based Oak Hill Advisors. Enet has grown since 2004, when it won exclusive rights to provide fibre-optic cable internet access to urban centres across the State. The last accounts, filed under the company’s registered name of e-Nasc Éireann Teoranta, the company showed an operating profit of €4.1 million for the year to end-April 2012.”
December 2013 – The procurement process for the National Broadband Plan begins.
November 2014 – “David McCourt, the US investor who led a buyout of wholesale telecom company Enet last year, has moved to acquire Airspeed Telecom, which provides telecom services to Irish companies. McCourt is leading a group of investors to take a majority stake in the company which owns the largest licensed wireless network outside the mobile operators. Granahan McCourt Capital, McCourt’s investment firm, will hold the stake on behalf of investors, which include his long-time partner Walter Scott and US investment firm Oak Hill Advisors.”
January 2015 – I file an FOI request seeking a copy of the 2009 MAN concession agreement.
February 2015 – Enet responds to a third party notification under FOI from the Department, and says release of the agreement would be commercially damaging to them.
February 2015 – The Department refuses to release the MAN concession agreement.
May 2015 – I appeal to the Information Commissioner. I argue it would break all precedent – once contracts are awarded it is a matter of public interest to see the agreement – commercial sensitivity is trumped by public interest.
July 2015 – Department publishes draft strategy for National Broadband plan. “There are seven companies likely to enter the bidding process securing what is likely to be a lucrative contract for putting the broadband network in place – Eircom, the ESB, UPC, Imagine, Siro, BT and e-Net. A number of options are also on the table after the network is in place. The first option would see the Government part-fund the network installation and then cede total control to the wholesale provider. Alternatively, the Government could run a concession model that would see the provider control the network for the duration of the contract – likely to be 20 years – after which it would return to State ownership. There could also be a joint venture: a public sector build but private sector operation. The last- and most expensive option would see the State build, own and operate the network itself.”
November 2015 – The Information Commissioner finds in my favour, and orders release of the concession agreement.
December 2015 – The Department appeals the Information Commissioner decision to the High Court. Everyone lawyers up – except eNet. The Department, oddly, files eNet’s affidavit.
February 2016 – Enet launches a fibre project in Enda Kenny’s hometown of Castlebar.
March 2016 – “Telecoms firm Enet has signalled its intention to bid for the Government’s rural broadband scheme. The tender will be awarded later this year. The company, which manages 94 State-owned metropolitan area networks, is owned by a consortium of US investors, which includes Oak Hill Capital, a $23 billion hedge fund.”
April 2016 – “The UK listed private equity giant, 3i, and a division of Warren Buffet’s Berkshire Hathaway are taking part in the E-Net consortium that is bidding for the State-subsidised €1.5 billion National Broadband Plan (NBP). 3i and John Laing, the British public-private partnership specialist, are among the financial backers of the consortium. The other two members with equity stakes in the bidding consortium are E-Net itself, and the telecoms private equity specialist Granahan McCourt, which is also a shareholder in the consortium that owns E-Net.”
September 2016 – Cube Infrastructure enters into an NDA with Enet as its interested in buying a 48% stake in the holding company that owns Enet.
November 2016 – Cube enters an exclusivity arrangement with ESCF (an alleged company of Oak Hill).
March 2017 – Cube, ESCF and a third company signed a letter of intent, which Cube claims would govern its acquisition of 78 per cent of the holding company which controlled Enet. The third party, Granahan McCourt Dublin (Ireland) Ltd, controlled 52 per cent of the holding company.
April 6, 2017 – The High Court rules categorically in favour of me and the Information Commissioner – meaning the concession agreement could become available. The Department have several weeks in which to decide on an appeal to the Court of Appeal.
The High Speed Broadband Map identifies locations and premises as being AMBER (the target areas for the State Intervention of the National Broadband Plan), BLUE (where commercial operators are delivering or have indicated plans to deliver high speed broadband services) or LIGHT BLUE (areas where eir has committed to commercial rural deployment plans to rollout high speed broadband to 300,000 premises by the end of 2018.) Published in full here.
Another important juncture
May 23, 2017 – In a PQ it emerges that the Minister has arbitrarily extended the MAN agreements to co-terminate in 2030. “Following an open tender process, enet was appointed in July 2004 for a 15 year term to manage the 28 Phase I MANs. In July 2009, following a further open tender process, enet was awarded a 15 year contract to manage the 60 Phase II MANs. I recently finalised decisions relating to the management of the MANs to provide that the current Concession Agreements co-terminate in 2030, in line with the relevant contractual provisions. This provides certainty to the market, and ensures that the MANs fibre networks will continue to play a key role in the delivery of telecommunications services in the regions during a dynamic period in the wider market.”
Why is this interesting? Granahan was in the middle of talks/due diligence with Cube to be sell a portion of its stake in the company that owns eNet. The Irish Infrastructure Fund (IIF) were in simultaneous talks. “Providing certainty” to the market also could include providing certainty to Granahan McCourt by insuring that their access to the MANs was secured until 2030. In my honest opinion Denis Naughten’s decision to remove doubt about the concession agreements would have benefitted the valuation of eNet. One key question: was he aware at the time that Enet was selling a stake in itself?
June 2, 2017 – The Department file their appeal to the Court of Appeal.
July 8, 2017 – Word of the Cube / IIF interest leaks out. “A State-backed fund created by Irish Life Investment Managers and a Luxembourg infrastructure investment firm are vying to buy a 47 per cent stake in Limerick-based broadband firm Enet in a deal that could value the company at up to €200 million. Enet is one of three firms currently competing for contracts under the Government’s National Broadband Plan to cover over half a million homes and businesses in coverage black spots, which will involve a State subsidy of up to €600 million. Sources said the Irish Infrastructure Fund – which was set up by Irish Life in 2012, backed by the Ireland Strategic Investment Fund and managed by Sydney-based AMP Capital – and Luxembourg-based Cube Infrastructure Managers are competing for the stake, which is being sold by American private equity firm Oak Hill Advisors. Enet is said to have an enterprise value, including debt, of €150 million – €200 million.”
July 27, 2017 – “A State-backed fund is set to buy 78 per cent of broadband firm Enet in a deal that values the company, which is among groups vying for lucrative National Broadband Plan contracts, at up to €200 million. The Irish Infrastructure Fund (IIF) – which was set up by Irish Life in 2012, backed by the State’s Ireland Strategic Investment Fund and managed by Australian investment company AMP Capital – aims to close the deal by the end of the year. The change of control was prompted by the decision by US investment firm Oak Hill to sell its 47 per cent stake in Enet. Oak Hill had backed Irish-American David McCourt’s company, Granahan McCourt Capital, in a deal to buy Enet four years’ ago. IIF’s offer prompted other minority investors to also sell out. The deal values Enet at €150-€200 million, including debt. Granahan McCourt and US billionaire Walter Scott, a childhood friend of investment guru Warren Buffett, will retain their combined 22 per cent stake.”
October 20, 2017 – The IIF/Enet deal closes.
April 18, 2018 – According to Naughten’s diary McCourt has lunch with Minister Naughten in the Members Restaurant.
July 16, 2018 – The Minister and officials meet McCourt for dinner in New York.
October 7, 2018 – News emerges that Cube are suing Granahan in Delaware.
October 8, 2018 – Granahan announces it has sold its remaining stake in Enet to the IIF.
So the IIF – which has €300m of public money at its disposal- has bought 100% of a company for about €200m whose main business is operating a €180m State-owned asset exclusively until 2030. The Minister decided to remove tender processes that were due in 2020 and 2024. His Department have refused to release the terms of that concession agreement despite 20 years of FOI precedent, an Information Commissioner ruling and a High Court judgment.
The case will come before the Court of Appeal in February.