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Smart Telecom’s well runs dry

12 Sep 2006

Irish alternative operator Smart Telecom has confirmed that it has run out of money, and its future contingent on it finding funding from a major shareholder. The news broke on Friday when surprised shareholders were told that founder and chief executive Oisin Fanning was leaving with immediate effect due to an undisclosed ‘medical condition’. He is being replaced in the short-term by the telco’s COO Ciaran Casey who has implemented a hasty business review in conjunction with NCB Stockbrokers to assess Smart’s next move. Industry watchers believe the review will lead to the sale of the company, although Smart has attempted to diffuse the rumours amid a run on its share price that had wiped 50% off its value by the close of trading.

In a formal statement to the London Stock Exchange, Smart Telecom said it had ‘fully utilised its cash resources and, in advance of longer-term funding, is reliant upon funding from its major shareholder. The purpose of this short-term financing is to provide the company with the financial resources to fund its working capital requirement for the short period during which the strategic review is being undertaken.’ The major shareholder in question is the Murtagh family of the building material group Kingspan, which holds a 19.9% stake.

Smart Telecom told shareholders at the meeting that it had signed up 16,500 residential broadband customers and 160 corporate accounts, and that a further 2,500 consumer connections were in the pipeline. However, it conceded that the numbers were well below expectations of around 32,000 residential broadband users by this date – a fact it has blamed on eircom, for the slow pace of local loop unbundling (LLU). To compound the altnet’s problems, Smart is still awaiting the outcome of its bid to secure the country’s fourth 3G licence. It was originally awarded the licence by the regulator ComReg, but the watchdog later revoked the concession following a dispute over the telco’s performance bonds. The case has been referred to the courts and a decision is expected next month. Even if it does overturn ComReg’s decision, questions remain over how it will find the money to pay for the licence and the estimated USD200 million initial outlay needed to launch 3G commercially.

Ireland, Smart Telecom (Ireland)

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