[IT]Consortium to pay off Smart's liabilities

viking

Arthur Beesley, Senior Business Correspondent

A consortium led by businessman Brendan Murtagh is likely to pay off Smart Telecom's outstanding liabilities with Eircom today, clearing the way for him to lead a refinancing of the troubled telco.

As ComReg commissioner John Doherty defended the industry regulator's stewardship of a crisis which saw 45,000 of Smart's fixed-line customers cut off without warning on Monday, Smart Telecom and Eircom were said to have struck a deal on a new interconnection agreement.

Mr Murtagh and his team, whose members have not yet been named, are believed likely to refinance Smart by €10-€15 million, a sum that will include €2.3 million to help settle the company's €4.3 million debt with Eircom.

The remaining €2 million will be drawn down by Eircom on a Smart Telecom bond.

While formal notification of the deal has been awaited for days, informed sources said an announcement today was likely. It is believed that Mr Murtagh proposes to delist Smart from the Alternative Investment Market, where its shares were suspended on Tuesday morning, and offer only a broadband service in the future.

Mr Doherty said yesterday that all Smart customers would have a partial reconnection restored by noon today.

"I think it is bad that three days after the event, Smart Telecom has still not put any material out for their own customers," he said.

ComReg was working with Minister for Communications Noel Dempsey to establish new protocols under which a network operator such as Eircom would be obliged to give 24 hours notice that it proposed to terminate a service. Such protocols would have to be set out in legislation, he said.

ComReg had asked Eircom to provide such notice in advance of the cut-off, but the first the regulator knew of the termination was just before it took effect.

"Regardless of legality, the fact that consumers should be stranded like that really is not the way we should be going forward," said Mr Doherty.

However, he rejected the suggestion that ComReg should have taken action to warn consumers but said it was unacceptable in a modern economy that consumers were left without a service. "I think we were surprised that it actually came to pass," he said.

"The regulator couldn't take pre-emptive action as that might in itself have pre-empted a crisis that would not otherwise have happened."

© The Irish Times

The comments from Commisioner John Doherty make for interesting reading. Putting aside whatever fault(s) lie at the doors of Smart and eircom, I find it hard to believe that ComReg are making any sort of realistic approach to putting mechanisms in place to prevent such a ridiculous situation occuring again.

John Doherty states that ComReg 'was' (prior to this scandal I wonder?) working with Dempsey to establish protocols that oblige eircom to give 24 hours notice that it was proposing to terminate a service. That, no doubt, is 24 hours notice to the telco who then has to try to negotiate the situation with eircom/ComReg and failing that must inform its customers of the proposed loss of service in the hours remaining.

If we re-run the Smart situation again hypothetically with the proposed legislation in place that requires eircom to give 24 hours notice. If Smart were unable to raise the money necessary to pay eircom and they then informed all customers immediately of the impending cutoff, not one single customer would be able to signup with another CPS operator within the remaining hours in the 24 hours notice period.

So, to ask the question, what the fúck use is a 24 hours notice period to anyone really? In the US, the notice period is 1 month whereas our telecoms poodle thinks that 24 hours will do the job nicely...

I've listened to other posters on this forum call for ComReg to be disbanded/comissioners sacked/fed to the dogs etc etc and I've always thought the posts were unneccessary and going a tad too far. However, upon reading John Doherty's comments in the article above I have to say that I now believe that the current heads of ComReg should now be relieved of their posts as they appear completely unable to perform the duties required of a competent regulator. The actions they did not take and the actions they are now taking with regard to the 24 hours mickey mouse notice period prove that they do not have an understanding of the issues at hand and are simply putting legislation in place to allow eircom to do this again but this time legally.

Tom Young

Yeah interesting. I find it hard to see how anyone acting as a regulator can enforce this type of thing. Regardless of legisation, contract law will apply. Notice to a regulator of 24 hours would be relatively expensive when a breaching party can rack up bills of 100's of thousands of Euro PER DAY.

Jokingly what we need is phychic regulators!

My questions is what is the composition of Creditors?

I suspect eircom are not the only creditor, I mentioned it before but forgot about SKY, RTE, Marketing companies and other telecom companies.

I suspect this matter is far more widespread than what is highlighting the issue i.e., suspension of services by the incumbent.

viking

From the IT again:

The Eircom chief executive isn't apologising for deciding to cut off Smart's service, writes Arthur Beesley, Senior Business Correspondent

Eircom's new chief Rex Comb is the man who took the decision to cut Smart Telecom's connection to its fixed-line system last Monday. He's only weeks in the top seat, but he didn't yield on Smart for a moment.

Nor will he apologise or take any blame for the affair.

Some 45,000 of Smart's personal and corporate customers had their outgoing call service cut without warning. Yet Comb rejects the analysis that casts him as a hardline Australian newcomer keen to make his mark. He says the fault lies with Smart, which has an unpaid bill of some €4 million with Eircom. "I'd hate to think that I'm seen as belligerent . . . I'm really taking the counsel of people who are working here.

"I think the chief financial officer has been working closely with Smart over the last month and some time ago went to the court to put a bond in place. And really, he's been doing a very good job of trying to work through the mire and I'm listening to what he's saying to me and I don't disagree with him on anything."

Many outside Eircom might disagree, but, in his first newspaper interview since joining Eircom last month, Comb maintains that Smart's difficulties arose solely because its business model is flawed. Eircom had no option but to act, he insists. "As a consequence of that, we gave them a termination notice four weeks ago which was then extended and extended.

"There's a way through this, they kept telling us. And then, to cut a long story short, when you're losing €100,000 a day, €90,000 a day, the question is: how long can you continue? The question is: how will competitors of Smart feel if we continue to do that?"

<snip>

Tom Young

Yes I susepected that was eircom's exposure. So 24 hours = 100K.

In that case a regulated notice would need to happen 24 hours earlier then wouldn't it

Sponge Bob

It was 100k a day at the burn rate in early september, they had reduced their headcount by 250 after that and reduced their burn rate before eircom actually pulled the plug ...oh! and Doherty Lied as usual .

"Mr Doherty said yesterday that all Smart customers would have a partial reconnection restored by noon today."

Another Lie John , you do make a habit of lying all the time.

Tom Young

Sponge Bob wrote:

It was 100k a day at the burn rate in early september, they had reduced their headcount by 250 after that and reduced their burn rate before eircom actually pulled the plug ...oh!

SB: That's just the pure Wholesale Interconection traffic bills, nothing to do really with the other massive cash bleed and SG&A overheads ST propagated.

viking

Mr Doherty said yesterday that all Smart customers would have a partial reconnection restored by noon today.

Could someone explain what that means exactly?

All Smart customers would have a partial reconnection restored by noon? So would customer's connections would be partially restored by noon? Or would partial connections be fully restored? Or what? Honestly, what does that statement actually mean?

SpongeBob, he was probably given that timeframe by eircom and just repeated it unchecked.

Sponge Bob

viking wrote:

All Smart customers would have a partial reconnection restored by noon?

A commissioner guaranted that all Smart customers would have some servic e back by noon today and he lied , many are still completely down !

Thanks for clearing that up Tom, eircom got €100k or €3m worth of business a month off Smart then...thats what you mean...and cut them off over 1.3 months of arrears (€4.2m)

viking

Sponge Bob wrote:

A commissioner guaranted that all Smart customers would have some servic e back by noon today and he lied , many are still completely down !

Yes, but whats the "some service" aspect of it? A dial tone/broadband/landline/mobile/international/inbound calls? A completely ambiguous statement by the Comissioner who should know exactly what the situation is and what services are being restored.

RangeR

Tom Young wrote:

My questions is what is the composition of Creditors?

I suspect eircom are not the only creditor, I mentioned it before but forgot about SKY, RTE, Marketing companies and other telecom companies.

The company I work for is one of those creditors and are owed quite a bit. Not as much as eircom but it's a substantial amount that we cannot afford to absorb.

damien

Am hearing that while ComReg may not have been told that "On Monday we are going to cut off Smart" there was definitely communications between eircom and ComReg about what eircom were going to do and they had a month to get a system in place. Doherty appears to be answering the question in a very clever way. Tut tut. Bottom line is ComReg knew what was in the pipeline.

Foxwood

Tom Young wrote:

Yes I susepected that was eircom's exposure. So 24 hours = 100K.

That's odd, because that would mean that the total €4 million figure relates to just 6 weeks of business.

Even if you just count the €1.7m that eircom claims was in arrears, that means that eircom cut off 45 thousand customers over a bill that was just 1 month in arrears?

Tom Young

Foxwood wrote:

That's odd, because that would mean that the total €4 million figure relates to just 6 weeks of business.

Even if you just count the €1.7m that eircom claims was in arrears, that means that eircom cut off 45 thousand customers over a bill that was just 1 month in arrears?

Correct.

The regulated contracts have a 3 strike and "your out" policy, as I mentioned before.

You can take it that this is easily just a component of the billing due for call traffic alone, on the interconnect.

Two other telco's providing termination services were allowing upto 400K a week to ST, that is unconfirmed. So in a month = 1.6 million each.

Tom Young

IrishTLR wrote:

The company I work for is one of those creditors and are owed quite a bit. Not as much as eircom but it's a substantial amount that we cannot afford to absorb.

Couple of promotions companies I am aware of are in the same position.

Sponge Bob

Hang on Here.:(

1. eircom gets €3m worth of business a month (€36m a year)
2. 2 'other companies" supply at a rate of €400k a week = (€20.4m each a year or €40.8m)

thats 3 suppliers (only , there are more) at €76.8m a year

Yet last year Smarts cost of sales was €34m for all suppliers. (p7)

I do not believe these figures somehow , particularly that they owed their suppliers that much in a given month or a week .

I do believe they spent money in the finest boo.com manner for a long time before it all juddered to a halt

Tom Young

Sponge Bob wrote:

Hang on Here.:(

1. eircom gets €3m worth of business a month (€36m a year)
2. 2 'other companies" supply at a rate of €400k a week = (€20.4m each a year or €40.8m)

thats 3 suppliers (only , there are more) at €76.8m a year

Yet last year Smarts cost of sales was €34m for all suppliers. (p7)

I do not believe these figures somehow , particularly that they owed their suppliers that much in a given month or a week .

I do believe they spent money in the finest boo.com manner for a long time before it all juddered to a halt

Unfortunately it is about correct. Obviously on an estimated basis.

Turnover at 3.3 million a month. 300 staff. Deck of cards waiting to topple.

The billing data is correct at that level. Margins are relatively low as your aware, so funding was required often to keep the ship from sinking.

BS: Lets pretend Smart had agreements with 2/3 other telco's and that's the weekly net amount, 400K. Remembering thats possibly a saving for mobile and international call termination.

Sponge Bob

Tom

less of the gnomic muttterings from your end please .

YOU stated that ST 'probably owed' €70.8m a year to 3 telcos alone eircom included , apart from any other supplier ...or staff costs.

I merely summarised it for clarity. I then stated I did not believe that overall figure at all . I believe it even less now.