Eircom is debating whether to accept an offer of the final third generation (3G) mobile licence from ComReg, the sector regulator which initially gave the €114 million licence to the troubled Smart Telecom.
ComReg's offer comes as a group comprising Eircom, Sigma Wireless and Motorola prevailed as "preferred bidder" for a separate tender to build a digital radio network for all non-commercial public bodies in the State, including the emergency services. That contract could be worth €250 million over 10 years.
The 3G development follows Smart's unsuccessful High Court challenge to ComReg's withdrawal of the licence in a dispute over draft performance bonds for €100 million that it had submitted to the regulator.
Eircom's directors will consider the issue at a board meeting next week but there is no certainty that they will accept the offer. Australian investment fund Babcock & Brown owns the business with the Eircom Employee Share Ownership Trust (Esot).
Babcock has pledged to increase investment in Eircom but it does have to buy a licence to enter the fledgling 3G market. The telco's rapidly-expanding mobile arm Meteor could provide a 3G service by way of a mobile virtual network operator (MVNO) deal to piggyback on the system of a rival 3G operator.
Crucial to Eircom's determination will be the multimillion euro cost of building a 3G network and the requirement for an upfront payment of €44 million to secure the licence, which costs €114 million over 15 years.
The group will also have to consider the commercial merits of entering a market in which it is unlikely to turn a profit for many years. However, failure to accept the offer might limit the long-term growth potential of a mobile business which is crucial to Eircom's business strategy.
"We have received a letter. We are considering our options," said Eircom's spokesman.
The offer to Eircom was widely expected because the telco was the underbidder to Smart Telecom in a beauty parade competition in 2005.
Eircom was very disappointed to have lost that competition as the process was triggered by its own application for the licence, the State's fourth. The other licensees are Vodafone, O2 and Hutchinson 3G.
"Eircom, as the next bidder and in accordance with the rules of the competition for the remaining 3G licence, has been offered the licence," said ComReg.
Separately, Eircom, Sigma Wireless and Motorola said through their TETRA Ireland consortium that the Government has selected them for the national digital radio services contract.
