Telenor threatened to 'pull the plug' on Esat deal over lack of financial guarantees

Moriarty Tribunal: Norwegian company Telenor threatened to withdraw from Esat Digifone in August 1995 on the day the consortium submitted its application for the State's second mobile phone licence.

The Norwegians also threatened to "pull the plug" in September after Mr Denis O'Brien told an oral hearing in the Department of Transport, Energy and Communications that his company Communicorp had a funding commitment from a US venture capital company.

Telenor was of the view that the deal was not as solid as it had been represented to the department.

Solicitor to Communicorp, Mr Owen O'Connell, a managing partner with William Fry solicitors, said a "crisis" developed between his client and Telenor immediately prior to the submission of the bid.

He said the central problem was that Mr O'Brien's side had committed to getting a financial guarantee to cover its part of the GSM project's costs, prior to the submission of the bid, but did not secure that guarantee.

Mr O'Brien had been "ducking and diving" around this issue since June when he committed himself to getting the guarantee, Mr O'Connell said.

The tribunal heard that Communicorp wanted a commitment to funding from Advent which it, Communicorp, was not obliged to take up.

Mr O'Connell said that the conditions that were being laid down by Advent were unsatisfactory to Mr O'Brien.

Mr O'Connell said that there was a loss of trust by Telenor in Mr O'Brien, but also issues to do with breach of contract, making statements to the department, and "simple money".

Money was at the bottom of all of this, he said, as Telenor was concerned that it would be committed to providing some of Communicorp's funding for the rollout costs.

In the event, the Norwegians never had to pay any of Communicorp's costs, he said.

Mr O'Connell said there were "heated discussions" between the two sides on August 4th, the day the bid was submitted.

Telenor did not get the guarantee it was seeking but decided to go along with the bid. "I remember being told there had been a row," Mr O'Connell told Mr John Coughlan SC, for the tribunal.

Mr O'Connell said he believed Mr O'Brien was hoping that once the bid was in Telenor would stop seeking the guarantee, but this did not prove to be the case.

He also said he believed that Telenor "lost patience" in September after Mr O'Brien told the oral presentation to the department that there was a commitment in place from Advent.

Telenor did not regard a letter of comfort that had been issued by Advent as a commitment, but was present for the oral presentation. "I think their patience snapped," he said.

A letter from Telenor on September 15th brought the matter to a head. "Denis had to come up with a commitment at this point, he simply had to, and he did."

Mr O'Connell said his notes of a meeting with Mr O'Brien on September 18th 1995 showed he was told that Mr O'Brien was in discussions with Mr Dermot Desmond in relation to a funding deal.

He said he may have been told prior to the meeting of the development.

The tribunal has been told that Mr O'Brien and Mr Desmond first began discussing Mr Desmond's possible involvement in August, during a trip to a Glasgow Celtic football match.

Mr Desmond was looking for 30 per cent of Digifone in return for his getting involved. He eventually received 25 per cent.

Mr O'Connell said it was presumed by everyone involved at the time that IIU would not keep all its shares in the medium term, but would place them with Mr Desmond's extensive contacts in the Irish economy and abroad. He continues his evidence today.