Tribunal told of 'hardball' talks between O'Brien and Desmond

The tribunal has heard of "hardball" negotiations between Mr Denis O'Brien and Mr Dermot Desmond immediately before the issuing of a mobile phone licence to Esat Digifone in 1996, during which Mr O'Brien said he "no longer trusts" Mr Desmond.

During these sometimes heated negotiations, Mr O'Brien was warned that he had "enormous bridges to rebuild" if he wanted to get anything from Mr Desmond and should telephone him "very fast" and "apologise profusely".

Details of the talks are contained in a note of a meeting kept by Mr Owen O'Connell, a managing partner at William Fry solicitors and at the time a solicitor to Mr O'Brien's Esat Telecom.

The meeting occurred on May 12th, 1996, as the three shareholders in Esat Digifone were discussing key issues to do with the percentage shareholding each could have in the company. The shareholders were Esat Telecom, Norwegian company Telenor and Mr Desmond's IIU Ltd.

The tribunal heard that Mr O'Brien's Esat Telecom had to borrow money from Telenor and IIU in order to buy a 2.5 per cent stake in Digifone which it was getting from IIU, and in order to pay its 40 per cent share (£6 million) of the £15 million licence fee.

According to Mr O'Connell's note, Mr O'Brien joined the meeting after it had begun and said he wanted to increase his shareholding in Esat Digifone to 50 per cent. He said he would want a commitment from Mr Desmond that he would sell a 10 per cent shareholding to him rather than split it 5-5 between him and Telenor.

The tribunal heard Mr O'Brien was anxious to increase his shareholding as part of his plan for raising funds for Esat Telecom through a US placement of shares. The note recorded Mr O'Brien saying that if he did not get an agreement that he could have 50 per cent, then he could not go ahead with getting the licence from the State. At this point Mr O'Brien held a discussion outside the room with Mr Michael Walsh, a director of IIU and Mr Desmond's representative at the meeting.

When the meeting resumed Telenor said it would not agree to Mr O'Brien's shareholding being increased to 50 per cent unless it too was able to increase its shareholding to 50 per cent. This would require IIU to sell all its shareholding and it was not willing to do this. There were also negotiations over how the money needed by Esat Telecom would be lent by its partners.

Mr O'Brien then said he "no longer trusts Dermot Desmond or Michael Walsh", according to the note, and "will seek an injunction to block the signing of licence".

When this was being read out, Mr O'Connell told Mr John Coughlan SC, for the tribunal, that what was being recorded in the note was "a bargaining process". He said it was Mr O'Brien's planned share placement in the US that was driving his desire to get 50 per cent of Digifone. He said Mr Walsh left the meeting and talked to Mr Desmond on the phone, before returning to report Mr Desmond's views back to the meeting. The note records Mr Walsh saying Mr Desmond had said he had made a deal with Mr O'Brien the night before and that he would not deal with people who reneged on an agreement.

Mr Walsh outlined proposals for new terms for the loan to Mr O'Brien from Mr Desmond which Mr O'Connell said was "in effect a threat" to Mr O'Brien. "This is Dermot really being forceful," he said. The note recorded Mr Walsh as saying that Mr Desmond had said that "if Denis wants something in writing, he doesn't trust me and he can f.o.".

It continued: "DOB enormous bridges to rebuild if he wants to get anything from DD... If DOB any sense will ring apologise profusely - tell DD what he needs and why. V Fast." The note recorded that Mr O'Brien then contacted Mr Desmond.