In April 1996 an exasperated Department of Communications wheeled out six top civil servants to defend the integrity of the process by which Esat Digifone had been awarded the State's second mobile phone licence. Their stout exposition of their actions killed off over six months of speculation about how a small Irish company had beaten some of the giants of the wireless industry to land the prize. The following month the licence was finally signed and the controversy slowly died away.
It is unlikely that the matter would have rested there if it had been known that, two months after Esat Digifone won the competition in October 1995, a $50,000 donation was made to Fine Gael by Telenor, the owner of 40 per cent of Esat Digifone, on behalf of the whole consortium.
The circumstances of the donation were being disputed yesterday by Fine Gael, Mr Denis O'Brien and Telenor; but, regardless of the details, the revelation will rekindle the controversy.
A number of government decisions dating back to mid-1995 are expected to come under the microscope - possibly by the Moriarty tribunal - starting with the decision to cap the licence fee which the winning applicant would pay at £15 million.
This decision - taken at the behest of the European Commission, according to the then minister for communications, Mr Michael Lowry - was what really opened the door for Esat Telecom. Without a cap on the licence fee, the small Irish company would have been hard put to match the cash which AT&T or Motorola would have put up. The circumstances under which the cap was introduced have never been fully explained, but it subsequently emerged that the Commission did not insist on one, but had instead issued a warning about the dangers of awarding the licence solely on the basis of an auction.
The decision to cap the licence fee also benefited Esat Telecom, as it led to the deadline for the competition being put back several months. The original consortium put together by Mr O'Brien had fallen apart at the that stage and the delay gave him time to put together a new one with Telenor.
Esat Digifone, as the new consortium was known, lodged its bid just days before the new deadline. Esat Telecom and Telenor would hold 40 per cent each and the remaining 20 per cent would be sold to unnamed investors.
Esat Digifone would also appear to have furnished additional information on its bid after the deadline and after the oral presentation of its bid. The information is alleged to have taken the form of a letter from International Investment & Underwriting to the effect that IIU would underwrite Esat Telecom's share of the costs of building the network and also the share of the cost attributed to the unspecified investors. It is unclear whether or not the contents of the letter were communicated to the consultants and Department officials who were running the competition. The Department said yesterday that several consortiums, not just Esat Digifone, tried to furnish additional information and were not facilitated. The Department would not confirm the nature of the additional information provided by Esat Digifone.
After two months of deliberations it was announced that Esat Digifone had won the competition, which compared the bidders on six criteria, including business plan, technology, coverage and other issues. The criteria were given different weights and this critical information was known only to a handful of people. It is not known if Mr Lowry was aware of them.
The announcement took most of the bidders by surprise, as no decision had been expected until November. Mr Lowry told his cabinet colleagues that he wanted to announce it straight away in order to stop it leaking out. Once again fortune smiled on Esat Telecom. Mr O'Brien has been open about the financial difficulties being experienced by Esat Telecom at the time, which eased considerably once the company's bankers knew that their client was a member of a successful consortium with a major new asset - the second mobile licence.
Controversy continued to dog the consortium, not least in April 1996, when it emerged for the first time that Mr Dermot Desmond - the financier behind IIU - would personally take the remaining 20 per cent of the consortium. By mid-1996 the focus started to shift from how Esat Digifone won the licence to whether or not it would be able to launch it on time.
The main reason for the delay was difficulty in obtaining planning permission for the network of radio masts needed to operate the new service. A deal to rent space on 700 masts from the Garda Siochana looked like the way out of the problem, but the negotiations with the Department of Justice were not going well by the end of 1996.
The company went on the offensive in early 1997, petitioning the office of the then Taoiseach, Mr John Bruton, in an attempt to push the deal with the Garda along. Esat Digifone denied newspaper reports at the time that it was on the verge of collapse and also that it was seeking exemption from planning legislation. But in mid-February the then minister for the environment, Mr Brendan Howlin, announced changes to the Planning Act which were of direct benefit to Esat Digifone. In March 1997 the new 086 network was finally launched. Six weeks later the $50,000 which Telenor had given to Mr David Austen for Fine Gael in January 1996 was released by Mr Austen to the party.