Business Opinion/John McManus: Brendan Murtagh and his family have at this stage pumped an estimated €30 million in to Smart Telecom, mostly in the form of shares that are now all but worthless and latterly in life saving loans.

And when push came to shove two weeks ago, they made an offer to buy the company, which is on the brink of bankruptcy, in a complex enough deal that will see them acquire the assets (and some €40 million in liabilities) of the company for €1 million.

There is something about Smart that is attractive to the Murtaghs, but it is not immediately obvious. The company is a wreck. The brand it spent millions building up over the last few years is all but worthless, helped on its way to obscurity by Eircom's decision to cut off its 55,000 leased-line customers after Smart didn't pay its bills. The whole thing is in danger of looking like a Harvard Business School case study on how to build a brand while forgetting to build a business.

So why have the Murtaghs chosen to plough on rather than let the company go into liquidation? One reason is that Smart is the main customer of the fibre network owned by Broad Band Communications, in which the Murtaghs have a 90 per cent stake.

Given that there is still overcapacity in the fibre market, it is obviously in the Murtaghs' interests to keep BBCL's biggest customer and its 15,000 broadband customers, afloat for as long as possible.

Another argument put forward in recent days is that nobody wins in a liquidation and the best way for the Murtaghs to minimise their already substantial losses is to try to orchestrate a reorganisation, and to avoid the messy litigation that might arise in a liquidation.

There is also the issue of the company's 3G licence. In the next few weeks, Smart will know the outcome of the case it has taken against the Commission for Communications Regulation (ComReg) to force it to issue the licence offered and then withdrawn earlier this year. The litigation would fail if Smart was to be declared bankrupt. But should Smart prevail, the licence would be a valuable asset, although it's doubtful that the company would have the wherewithal to capitalise on it. In addition, the outcome of the case is likely to be appealed.

While there are plenty of plausible explanations for why they might want to keep Smart going, none of them really stack up when measured against the Murtaghs' apparent willingness to take on €40 million in liabilities (although we don't know the detail of the extent of their personal exposure to the debts).

The consensus is that the Murtaghs believe that there is a business to be saved in Smart. Optimists would argue that badly damaged though the Smart brand may be, there is still some value in it and under new management, it could form the hub of a new company created through the merger of some of the other alternative suppliers. A link up with Imagine has already been mooted.

They also believe that the Government and the regulator have a strong interest in seeing the company survive. Smart is one of the biggest users of the metropolitan fibre networks built by the State that are meant to offer independent operators an alternative to using Eircom's networks. The departure of Smart from the market would leave the Government even more exposed to criticism over its failure to drive broadband penetration.

The regulator would also not like to see the failure of what was until recently the second largest player in the market. Indeed, there is a view that the events of the past few weeks will have focused minds in Government on the need to ensure that the regulator has the resources and motivation needed to ensure the obstacles that tripped Smart up are removed.

But for the time being they remain, notably because of the lack of full number portability and the inordinate amount of time it takes for a broadband customer to switch supplier. And it's hard to understand the optimism that somehow the Government will be galvanised into action. The sum total of the Government's response to date appears to be the promise of legislation to ensure that if Eircom is going to cut Smart off again it has to give 24 hours notice.

The idea that some draconian new powers are going to be given to ComReg, or that Eircom will sit on its hands if they are, seems a little far fetched. Given the extent of the obstacles that face it, it is very hard to see a great future for Smart or to avoid the feeling that the Murtaghs are somewhat deluded.

But on the other hand, if you had meet Brendan Murtagh 30 years ago and he told you he and his brother Eugene were going to turn a small family business in making metal cladding in Kingscourt, Co Cavan, into an international company quoted on the stock market with a market capitalisation of €2.7 billion, you might have expressed similar sentiments.

jmcmanus@irish-times.ie