Cablelink suitors square off in High Court battle over contested bids

Telecom Eireann and RTE propose to sell Cablelink within days, for more than £525 million (€666.61 million), to US-based NTL Incorporated, the High Court was told yesterday. But a consortium led by Esat Telecom claims it is entitled to acquire Cablelink for £410 million, or £115 million less.

If the NTL offer is not accepted by Wednesday next, it will lapse, said Mr Jonathan Paine, of investment bankers NM Rothschild, which is conducting the sale of Cablelink for Telecom Eireann and RTE.

Any delay in implementing Cablelink's business plan, involving the roll-out of new services by the company, could allow a competitor to move into the market, Mr Paine said in an affidavit resisting an application to continue an injunction restraining the sale to NTL.

However, before the court adjourned the hearing to Tuesday next, the president of the High Court, Mr Justice Morris, asked the parties to take instructions over the weekend on whether the May 5th deadline for acceptance of offers for Cablelink might be extended.

Meanwhile, Mr John Gregg, chief operations officer of NTL, denied claims by Mr Denis O'Brien of Esat that Mr Gregg had, one week before final bids were to be submitted for Cablelink, asked Esat to co-operate with NTL and fix the bid price. Howberry Lane Limited, the Esat-led consortium formed to bid for Cablelink, yesterday applied for an interlocutory injunction - an order continuing until the trial of the action - restraining the sale of Cablelink to NTL or to any other company who made a "formula bid" for it rather than a bid in monetary terms. On Wednesday night, Howberry secured an interim order to that effect, and the matter was dealt with again yesterday.

In the action against Telecom, RTE and NTL, Howberry claims that NTL submitted an invalid tender for Cablelink because it did not submit an offer in pounds but instead offered to pay 15 per cent more than the highest bidder. It claims that the highest legitimate bid - of £410 million - for Cablelink was made by Howberry on April 23rd last.

Mr Bill Shipsey SC, for Howberry, said Rothschild had said final bids should be submitted by April 23rd and had stated in a letter in January 1999 that the bids should be made in pounds. Howberry made a final bid of £410 million by April 23rd.

The parties were then told on April 26th that revised final bids were to be submitted on April 27th, "expressed as a fixed number of Irish pounds". They were then informed that £471.5 million and £410 million were the two highest bids and that formula bids would not be accepted. It was at this point that the procedure "went off the rails".

This allowed NTL, which had submitted a formula bid - offering to pay 15 per cent more than the highest bid submitted by April 23rd - an unfair opportunity to mend its hand. In the event, Howberry, under protest, made a "final, final" bid of £485 million and NTL offered in excess of £525 million.

This was wholly at odds with the promise of transparency and openness made by the vendors of Cablelink, he said.

Earlier yesterday, Mr Justice O'Sullivan refused an application by Mr Shipsey for an adjournment to Tuesday next. The adjournment was resisted by the defendants, who stressed that time was of the essence. Mr Donal O'Donnell, for NTL, said the May 5th deadline for acceptance of the £525 million bid was "real". The hearing then opened at 2pm before Mr Justice Morris, and continued to 6pm.

In an affidavit sworn on behalf of Telecom and RTE, Mr Paine said Howberry's claims were not supported by the documents which constituted the bid process initiated for the sale of Cablelink.

No commitment was ever given that Cablelink would be sold to the highest bidder as of April 23rd last. Throughout the bid process, the defendants made it clear that they reserved the right to dispose of the company to any party, to vary the process at their discretion and to decline to accept any bid at all.

Specifically, in respect of the bids received by April 23rd, they reserved the right to proceed to further bidding rounds or to decline to sell to any bidder, Mr Paine said. Mr Paine said he was not in a position to comment on Mr Denis O'Brien's claims that Mr John Gregg of NTL had effectively suggested to him that if all the bidders joined in one consortium, they could fix the bid price at a greatly reduced figure. Mr Paine agreed that Mr O'Brien had informed him [Mr Paine] of the alleged proposals, but said Mr O'Brien only did so on Monday, April 26th, after submission of what was alleged to be Howberry's final bid.

He said that, far from rebuffing Mr Gregg's alleged advances, Mr O'Brien had allowed discussions to proceed to a stage where, according to Mr O'Brien, documents were exchanged between Mr Gregg and Howberry on a coded basis. E, it was clear when Mr O'Brien made the price-fixing allegations to him on April 26th, about a bid to fix the price, that any proposal for collusion had failed, Mr Paine said. In the circumstances, it did not appear necessary to take any further action at that stage.

In submissions, Mr Shipsey, for Howberry, said the decision to sell Cablelink had been taken at Cabinet level. The issues in the case related to the tendering procedure chosen. He argued, as a matter of law, that the defendants had no unfettered discretion to change the ground rules as they wished without notice to the participants.

The hearing resumes on Tuesday.