Pressure on cable companies intensifies

The major cable companies are under pressure to accept by this evening new licensing terms put forward by the telecommunications regulator, Ms Etain Doyle. The companies are understood to have been in correspondence with her office right up to the weekend. Some will only decide on their course of action this morning, while at least one of the main players has told Ms Doyle that it will not respond until later in the week.

Cablelink, the company owned by Telecom Eireann and RTE, is likely to accept the new terms, industry sources believ, although Cablelink could not be contacted for comment yesterday. The company would hopes that a new licence would clear the way for its proposed sell-off. The investment bank working on the Cablelink sale, Rothschild, has not been able to issue a detailed prospectus to potential buyers because of the uncertainty hanging over Cablelink's licenses. In turn, this is threatening to hold up the planned summer initial public offering of Telecom Eireann shares.

Ms Doyle's office is offering the industry 15 year licences to replace their existing licenses and said that they will be able to offer services exclusively in their license areas for five years, before other are allowed to compete.

The industry has had serious reservations about having to reapply for licenses, about the terms on offer and about the status of unlicensed deflectors. Ms Doyle has set today as the deadline for acceptance of the new terms.

The attitude of the other two major players - Princes Holdings and Cable Management Ireland - in the industry remain uncertain, with both understood to have had serious difficulty with some of the proposals put forward by Ms Doyle in her licence terms.

Of the three companies, Princes has the largest MMDS interests and is understood to have been pressing for a commitment for what is known in the industry as a "return path". This is a mechanism to allow it to offer two way interactive services to its MMDS customers, most likely to be achieved through the allocation of wireless spectrum to allow signals to be sent from local MMDS locations.

The regulator's office is believed to have suggested, that rather than offering such wireless spectrum locally, it would be preferable to allocate it nationally. However, proposals from the office that the cable and MMDS companies could collectively apply for an allocation through a joint company do not appear to have found favour with the industry. Sources believe that clarifying this issue is vital for Princes. It is understood that Princes, owned by Independent Newspapers and TCI, has told the regulator that because of the logistical difficulties of consulting its board, it will not be able to respond until later this week.

It also remains unclear what attitude Cable Management Ireland will take to the proposed terms. Its main shareholders are institutions - Legal & General owns 75 per cent, with Barings owning a further substantial stake.

Opinion is believed to be divided among the smaller operators, with at least one set to legally challenge the new terms, industry sources believe.

The negotiations on the new licences have been lengthy and often heated, with the industry initially arguing that they should not have to reapply for licences to offer existing and new services in their existing areas. A legal challenge from one of the major companies is still a possibility and, depending on the terms of the challenge, this could delay the whole process.

The Government will be keen to see the issue cleared up, as any further delay in the sale of Cablelink would seriously threaten the timetable for the Telecom IPO, tentatively planned for early summer if markets conditions are favourable.