The five parties interested in winning the Cablelink franchise have until noon on Friday to lodge their bids. It is thought that the winning bid will be around the £360 to £380 million (€457.10 million) mark, as price will be the sole criterion.
US-based cable group NTL, which owns the Cabletel network, is seen as the front-runner, according to industry sources. They say Cable Management Ireland (CMI), which has a franchise in the Swords/Malahide area, as well as in other growing urban areas, is now an outside contender.
It is understood that CMI, whose major shareholder is Legal & General, has still not concluded a deal with a partner with the necessary telecoms expertise. Telecommunications will be a key part of the services the successful bidder will have to roll out to make a return on the investment. The successful bidder will also have to spend up to £200 million to upgrade the Cablelink network.
Last week, the bidders, together with their financial and legal advisers, were given further access to what is known as the "data room", which has all the details on Cablelink and its business. They also had further consultations with NM Rothschild, the London merchant bank which is advising Cablelink.
This is a key week for two of the bidders - Esat Telecom Group and Princes Holdings, known as Irish Multichannel - as not winning the franchise would force them to re-assess how they should develop their businesses.
It emerged last week that Esat Telecom had found a partner to help it mount its bid for the franchise, which covers 350,000 homes, mainly in Dublin but with a presence in Waterford and Galway. It has linked up with Charter Communications, owned by Microsoft co-founder Mr Paul Allen. Charter is one of the top 10 cable companies in the US.
Charter, which is taking a 40 per cent stake in the consortium - with Esat taking another 40 per cent and a third bidder to take the remainder - will give Esat the cable expertise it needs.
It is understood that Esat's chairman, Mr Denis O'Brien, had been actively seeking a partner for the bid in recent months. Sources said Mr O'Brien was "extremely determined" about winning the franchise, although unofficially he has played down his interest, telling associates the price is being over-hyped.
However, Esat, through its residential subsidiary, Esat Clear, is investing considerable monies to target home phone users. Not winning the franchise could seriously undermine its efforts in this market sector. This is because Cablelink has 350,000 customers, who would be offered attractive packages, including programming, Internet services and telephone services. Sources also said that not winning the franchise could leave Esat vulnerable to a bid from another operator. The Charter connection will give Esat added financial muscle, but sources said it was unclear how much it was prepared to pay. "Denis was never afraid to bid high," said one source.
Ironically, one reason why NTL is seen as the favourite is because it has a reputation for paying whatever money it takes to succeed. Although the company has remained very quiet about its intentions - it barely confirmed its interest - industry sources say the company is extremely keen to buy Cablelink. NTL is currently cabling homes in Northern Ireland and would like an all-Ireland operation. It claims to have 60,000 residential customers in the North. It is also quoted on the Nasdaq. In January, Microsoft invested $500 million in the company.
The Telecommunications Inc (TCI)-led bid - it owns 75 per cent, while Princes Holdings, an Independent Newspapers subsidiary, has 25 per cent - is also seen as a strong contender. "They want to win it really badly," said one source.
The consortium, which jointly owns Irish Multichannel, has 160,000 customers and also has MMDS licences. It operates franchises stretching across the Republic, and one of its key arguments is that it is the best placed company to provide a full range of services to both urban and rural customers if it succeeds.
However, Princes sources privately admit that the company will have to re-assess its own future if it fails. This is partly because it will be unable to significantly grow its business, in terms of its customer base. In turn, it might then become a target for a take-over by the Cablelink franchisee. The same could happen to CMI, say sources.
However, sources close to Princes stressed that the company "has a lot of other plans for developing services" regardless of whether it gets Cablelink.
United Pan-European Communications (UPC), the Dutch-based cable communications group, is a strong contender, but sources believe the company will only bid exactly what it feels the franchise is worth. "If they [UPC] do not win, they will just move on to the next project. They do not have as much to lose as some of the others," said one source.
The bids will be considered by a steering committee, which includes representatives from Telecom Eireann and RTE (the current shareholders) and from the Departments of Finance and Public Enterprise.
The sale could go through in a matter of weeks. However, yesterday some of the bidders said NM Rothschild may negotiate with the two highest bidders to see if it can extract a higher price.
