International Investment & Underwriting (IIU), the group controlled by financier Mr Dermot Desmond, has sold half its shareholding in Esat Digifone to Telenor and Esat Telecom, the two major shareholders in the mobile phone company, for a total of £5.8 million.
IIU has sold a 10 per cent holding it has held for more than two years in the company which operates one of the two national mobile phone licences.
Sources close to IIU said that the company made a profit of around £4 million on the sale of part of the Esat Digifone stake. The Desmond-controlled investment company retains a 10 per cent stake, with Esat Telecom and Telenor each having 45 per cent.
Yesterday, Mr Denis O'Brien, chairman of Esat Digifone, said the decision by IIU to sell its holding "was not at all a loss of faith". "I don't know why IIU decided to sell its stake, but they have made a profit by selling it," he said. Sources close to Mr Desmond have said the decision to sell the stake was purely a financial transaction and did not imply "any loss of confidence" in Esat Digifone.
However, a year ago there was industry speculation that IIU would, if anything, increase its shareholding in Esat Digifone. Mr O'Brien said yesterday he was not aware whether IIU intended to sell its remaining 10 per cent.
Meanwhile, Mr O'Brien has announced that Esat Telecom is considering a flotation at some stage during the next year. "We will probably do an Initial Public Offering (IPO) over that period, but we are still at the preliminary stages at the moment," he said.
If Esat did seek a listing, it would probably be done on the Nasdaq market in New York first, although a listing on a European exchange might be sought at the same time, he added. He would not discuss whether a listing on the Dublin market would be considered.
Mr O'Brien refused to speculate about how much the shares might be worth, if listed. All he would say was that he hoped they would be "worth a lot".
"There is no need to make an IPO at the moment, because we are sitting on a lot of money. The best time to go for a listing is often when you don't need the funds," he stated, adding that the group "has £57 million in the bank".
Financial figures released by Esat Telecom show that the group had trading losses of £1.6 million in the first quarter of 1997 and £4.3 million for the full year of 1996. The group invested £8 million in capital expenditure and debt servicing in the first quarter, with £3.8 million being invested in Esat Digifone, interest payments of £2 million and depreciation costs of £700,000.
The main reason for the losses are start-up costs associated with the set-up of the telephone network.
At the end of March, Esat Telecom had 2,391 customers - an increase of 76 per cent from the first quarter of 1996. Gross billings were up by more than 40 per cent to £3.5 million in the first quarter, while total billings in 1996 were £10.9 million.
A deal between Esat Telecom and CIE to co-operate on the construction of a national telecommunications infrastructure will be signed "very shortly", according to Mr O'Brien. The company was also developing "opportunities for the construction of local area network centres throughout the Republic; one is already at construction phase in Dublin", he said.
On the question of Esat Telecom acquiring an Irish Internet service provider, Mr O'Brien said the company was still in discussions with three service providers.
