State Ownership
What about a State-owned commercial enterprise in telecoms?
All this whinging about the next likely takeover of Eircom – the fourth change of ownership in seven years – is not getting anybody anywhere. Business lobbyists, economic analysts and some politicians have been complaining about the likely impact of a new owner trying to recoup its investment in buying Eircom. But there's nothing the Government can do to stop the latest sale and the telecoms regulator is pretty powerless too.
Ironically, the trade union movement could derail the latest sale of this economically essential company by using its 21.65 per cent stake as a blocking mechanism. But the Communications Workers Union hasn't taken its snout out of the trough for six years and is unlikely to have any intention of doing so now by vetoing another money-spinning sale.
And watch how it maintains its shareholding in a new entity, while extracting dividends in compensation, all to avoid payment of tax to the State.
The staff, as owners of the Employee Share Ownership Trust, have been allowed to take €424 million in cash tax-free so far, an average of over €87,000 per employee tax-free. Esat still owns ordinary shares worth up to €520 million, depending on the price Babcock and Brown pays and preference shares valued at another €100 million or so. The tax lost to the State in all of this has been estimated at about €300 million, all thanks to an extraordinary deal Charlie McCreevy agreed when Tony O'Reilly's Valentia consortium made its purchase of Eircom.
Funny how the rest of the unions are so quiet about this and how they said nothing when the four most senior managers in Eircom shared a near €30 million bonus when the company was bought by Valentia.
Lots of other people will make money out of the proposed purchase of Eircom – and the possible spliting of it into new companies – by Australian bankers Babcock and Brown. Various legal, accounting and banking advisers, to all parties, are said to have "earned" about €300 million in fees to date from Eircom's travels. The State kick-started the National Pension Reserve Fund with about €5.5 billion from the initial sale back in 1999. The main losers have been the ordinary people who bought the hype and shares from the Government and who then failed to sell at a profit in the time such an opportunity presented itself.
They weren't the only losers though. The people of Ireland have lost because the State's broadband infrastructure has not been developed as quickly as the economy requires. Eircom's last private-equity owners raped the company, doubling their money in less than 30 months through a combination of large cost-cutting and slashing capital expenditure. Eircom's priority has to been to repay its its lenders – or rather the banks that lent the money to its owners to fund the purchase of the company.
Years of under-investment by Eircom has slowed and inhibited broadband rollout. At present it plans to spend €1 billion over the next five years on infrastructure, but that is nowhere near enough.
Babcock and Brown has no experience in managing a telco. They will have to borrow heavily to buy and then the priority will be to make a return on that investment and quickly too. As owners of the company's assets, they would use these to service the borrowings they took on to buy the company. In any decision as to what to do with the cash – as between investing and paying debt – the latter will hold sway, just as it did when Valentia took the company off the stock market and then sold it again 30 years later. The problem is that it is a trick that's hard to pull off more than once.
There have been suggestions that by forming two companies – one to run the infrastructure network, the other to sell services to the public – it might be possible to raise the amount of money that could be invested in the former. But this will only happen if Babcock & Brown feels it would better maximise its profit.
Babcock and Brown has come in for some stick already, notably from Fianna Fáil TD (and Oireachtas Communications Committee chairman) Noel O'Flynn, who spat that the company was only interested in profit; what else would Babcock and Brown want only profit? Would it make its Australian shareholders feel better by foregoing profit to make the Irish telecoms infrastructure better? It was another useful away of deflecting attention from the failure of the Government to hold onto the network when it was authorising the sale of the rest of the company back in 1999.
But there is a way the Government can partially redeem its error and which the rest of the trade union might like. How about establishing a major new State-owned commercial enterprise in the telecoms sector, to provide a nationwide broadband network at a level private enterprise is not supplying at present?
The private sector incumbents, especially rivals to Eircom, might go mad, and cite all sorts of EU competition laws, but given the low roll-out of broadband infrastructure and its economic importance to the country, here's an example of where State investment to complement the private sector may be required.
Communications minister Noel Dempsey has options that might clear any legal and competition hurdles. There is broadband infrastructure in existing State-owned companies, particularly the ESB's existing 1,800 miles of fibre optic cable and the greater amount available to CIE through its once controversial deal with Esat. Bord na Móna apparently has a useful communications network in the midlands and RTÉ can pitch in with some assets too. Put them all together under a new umbrella and it is possible that the Government could legitimately confront Eircom and other private operators with a company that would do the State some service.
It's certainly better than whinging about the past at Eircom and the present that cannot be controlled.
Give 'em what they want
Give 'em what they want. Don't do anything that's going to turn off the voters. Those may as well be the two mantras Government ministers are following at present. There is only a year to a General Election after all.
The "give 'em what they want" philosophy will apply whether it is justified or not. Few people would argue against compensation for the victims of Dr Michael Neary's butchery. But the speed with which a redress tribunal has been granted, and the commitments to adequate compensation, must be at least partly influenced by a desire to ensure the Government cannot be branded uncaring and calculating. The memory of Michael Noonan's handling of the Hepatitis C disaster when Minister for Health, and the subsequent television drama prior to the 2002 election, must be clear to the Government. These women will not be allowed to become martyrs to uncaring government.
That's just the start of it, as every lobby group must know. The trade unions in particular must be confident about stating their case. The reported impasse in the partnership talks has been noted in many media outlets and dutifully hyped as a potential crisis, exactly as veteran observers had anticipated. It'll all be sorted eventually and if not all to the liking of the trade unions, they'll still get more things they want than not.
Which is why the Government seems so unlikely to face down the trade unions over issues such as the future ownership of Aer Lingus, irrespective of what commitments have been made to the company that it will be allowed to raise money for expansion. If the sale does go ahead, expect massive concessions such as generous funding of the staff pension plan. But even that may not be enough.
The "don't do anything that's going to turn off the voters" instruction has been grasped enthusiastically by Environment Minister Dick Roche. Last week, he received a specially commissioned report on the future funding of local government that highlighted a potential shortfall of up to €2 billion between now and 2010. Clearly – in the absence of cost savings – new methods of raising revenue or extra taxes are required, preferably from those who consume the services.
The specialist report made several tentative suggestions, such as the imposition of water rates and a tax on holiday homes. Another Dick – Cheney – would have been proud of the speed with which Roche shot them down. Water rates were not Government policy, he insisted, while in the same breath he maintained that users would have to pay for the full economic cost of services provided. It doesn't matter apparently that metering might have the impact of conserving a scarce resource, and it would be possible to introduce annual household quotas that would have to be reached before any charges are levied.
He defended those with holiday homes on the basis that they spent their holiday money in Ireland instead of abroad, apparently disregarding the impact on property prices the buoyancy in this market for the well-heeled has created. So instead business, even new ones and those struggling to make the profits that attract a low rate of corporation tax, will end up paying more in rates to fund any shortfall.
Roche has ideas for that as well. He opined that most local authorities will learn to make do with what they have already and that, if they are lucky, he might be able to put a few more euro their way. Doubtless there are efficiencies that can be introduced to tackle waste, but experience suggests that good projects are as likely to suffer cutbacks as bad ones.
What he proposed came to nowhere near €2 billion. But that wasn't the point. If doing the right costs votes then it won't be done, this side of an election at least.
Hear what you want to hear
'Let the public hear what it wants to hear" might be another instruction Taoiseach Bertie Ahern has handed down to his ministers. He was certainly at it himself last Monday in discussing the shocking circumstances of the murder of single mother Donna Cleary.
Ahern opined that there were too many lenient sentences being handed down by the courts, especially in cases of murder.
Does the Taoiseach not know that murder carries a mandatory life sentence? Does he realise the distinction between murder and manslaughter, the latter conviction giving the judge discretion in the punishment he applies? Was he trying to imply that the problem of gun use rests with poor sentencing policy on the part of the judiciary?
Clearly, all of that is nonsense, but never mind. It was the type of tough talk that the public wanted to hear and Ahern duly delivered.
All work and no play
There are a few sports pundits in this country who have made a living out of the sport-as-a-metaphor-for-life school of analysis, particularly as their own careers morphed into current affairs commentary beyond sport. They have pontificated as if their views on the preparation and performance of Irish international sports teams somehow provided a deeper insight into the developing collective psyche of the Irish nation, something only they were qualified to tell us about.
For example, they fell upon Roy Keane's "fail to prepare, prepare to fail" comment in Saipan as proof that modern-day Ireland was no longer as feckless as it once had been and that the old shibboleths were no longer applicable to the most talented of the new generation. They opined that if our sporting teams were to achieve the success that our economy and our artists have in recent years, then a new level of professionalism and desire would be required, instead of the old "give it a lash" mentality.
Which is what makes what happened to Brian Kerr as Irish soccer manager, and what could happen to Eddie O'Sullivan as the rugby's team coach, so interesting.
Kerr was devoted to detail and preparation, so much so that Roy Keane was happy to return to play under his management of the Irish team. The other players apparently hated it, preferring instead to regard playing for Ireland as a welcome relief from their day jobs with club sides in England. Kerr's successor Steve Staunton is pointedly returning to the old ways, with the clear approval of the senior players.
Staunton has reinstated Mick Byrne as physio, for example, although clearly Byrne's role is somewhere between court jester and confidante, with motivation and pop psychology his major qualifications.
Drinking sessions are back in too, although they were never really out, judging by some newspaper coverage of the closing months of the World Cup campaign. The difference is that they may no longer be bitching sessions, but bonding ones instead, even if part of the rationale for Keane's walk-out from Saipan was his unease at the precedence given to alcohol use over training.
The soccer players should be grateful they are not part of the rugby squad. There the players are required to live together "in camp" for 42 out of 49 days while the Six Nations competition is being completed. The logic is that it allows staff to deal with injuries and maintain fitness and diet schedules. But could this level of preparation be damaging to the individual and collective mental well-being of the Irish rugby squad? Could it be that while professionalism allows Irish teams to reach higher standards than heretofore, there remains something in the Irish spirit that requires downtime if full potential is to be achieved?
Or to enter the tradition of those commentators mentioned earlier: Could it be that "all work and no play" has become a metaphor for the down-side of the Celtic Tiger generation and that it has sapped our spirits?
Damn, this style of hackery is catching.
Matt Cooper presents The Last Word on 100-102 Today FM, Monday to Friday, 5pm to 7pm