Friday 18 October 2019

€5bn broadband network worth €350m - Bruton

Communications Minister says value of completed rural network won't be 'anything close' to State's subsidy

Communications Minister Richard Bruton
Communications Minister Richard Bruton
Adrian Weckler

Adrian Weckler

The completed National Broadband Plan network to 540,000 rural homes may be worth less than €350m as an asset despite costing €3bn of State funding to build, according to Communications Minister Richard Bruton.

Mr Bruton said that the finished service - which will cost a total of €5bn - will be the equivalent of one tenth of Eir, which was acquired for €3.5bn last year.

Mr Bruton was speaking amid accusations that the State is financing a multibillion project for an asset that will revert to private ownership when a 25-year National Broadband Plan contract with the sole remaining bidder is completed.

Mr Bruton told the Irish Independent's 'Big Tech Show' podcast that at the end of the contract the finished infrastructure would not be worth "anything close" to €3bn.

"No. And if it realises more than is expected in the model, 40pc of the residual value will come back to the State. Similarly, the State will claw back excess profits earnings during its growth phase. But from a market valuation perspective, it will not have a large capital value," he said. However, Mr Bruton refused to say what level of value or profitability has been agreed in the broadband tender contract before the State's clawbacks kick in.

Under the rural rollout plan, National Broadband Ireland (NBI), the company set up to run the network by Granahan McCourt, will pay Eir close to €1bn over 25 years to rent Eir's poles and ducts. This leaves 146,000km of fibre as the bulk of the asset to be handed over to NBI when the contract is completed.

Mr Bruton also insisted that there was no rise in State subsidy levels due to Eir withdrawing from the tender contest, leaving only Granahan McCourt bidding for the contract. "No, it didn't increase at that point," he said. "The bids from the two companies were comparable."

However, he said that the costings in both bids were "more expensive than had been anticipated".

"At that stage, we had an evaluation of whether it would continue. Eleven alternatives were examined. They were found to be either more costly, more risky or would jeopardise delivering the project."

Mr Bruton defended the Government's non-disclosure of the proposed contract's financial terms and conditions, saying that it was standard practice in a public-private partnership.

Asked about how much National Broadband Ireland would be allowed to make in profit before clawbacks kick in, he said that revealing such detail could undermine commercial contract negotiations.

Asked whether the terms were more or less generous than the regulated 8pc return that Eir was allowed to make on its pole rental to the NBP scheme, Mr Bruton again declined to give any clarification.

He said that the network will revert to State ownership if NBI neglects the infrastructure or falls too far behind in its rollout targets. "If they fall 12 months behind at critical junctures, that would be a position where the State can step in," he said.

"But even before that, they would face quarterly penalties in the event of failing to keep up with the targets they've set."

Elsewhere, Taoiseach Leo Varadkar said that he welcomed a proposed inquiry by the Oireachtas Communications Committee into the terms of the National Broadband Plan.

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