A judge yesterday questioned if telecoms group Smart was honest in its approach to resolving difficulties with communications regulator ComReg over securing a mobile licence from the agency.
ComReg awarded the third generation (3G) mobile licence to Smart in November. It withdrew it in February, claiming that the company failed to provide it with an acceptable bond for €100 million by an agreed deadline of January 30th.
The bond was a guarantee that the company would meet agreed targets in building a network and providing a service.
Smart says it provided the regulator with three draft performance bonds, one from Ulster Bank and two from BT and Chinese multinational Huawei, which were building its network, for €100 million.
It says that over the weekend before January 30th, which was a Monday, ComReg sought changes to the bond documents that prevented the company from meeting the deadline.
According to Smart's chief operations officer Ciarán Casey, who gave evidence yesterday, Smart believed that it could resolve the issues that the regulator raised but would not be able to do so by the close of business on January 30th.
He said that there was a problem in relation to a €50 million bond provided by Huawei. The Independent Commercial Bank of China (ICBC) was to underwrite the bond. However, the Chinese banks shut on the Saturday to celebrate that country's new year, a holiday that lasts up to a week.
The court heard that over that weekend Mr Casey sent an e-mail to his colleagues, including chief executive Oisín Fanning and head of finance Brian Timmons, saying that the company should tell ComReg it should accept the bonds and grant the licence.
However, he added that should ComReg "call our bluff and accept the bonds" that Smart should tell the regulator that the "Chinese end got mixed up" because they thought that changes were required to the bond.
ComReg's senior counsel, Paul Sreenan, put it to Mr Casey that this was not in fact the case and that the reason for the problem was that the Chinese banks had shut. Mr Casey said that the e-mail was only intended to provide his views to management. He pointed out that Mr Sreenan was only dealing with the first half of the correspondence and said that the second half dismissed taking this approach.
Mr Justice Peter Kelly asked Mr Casey if this was an "honest" tactic. "Had we said to them [ ComReg] that you must accept these bonds, that would not have been an honest thing to do," Mr Casey replied. He stressed that the company did not in fact pursue this tactic.
Mr Sreenan argued that Ulster Bank did not agree with the terms of the guarantee as laid down by ComReg. These provided that the regulator could demand payment if Smart had not met performance targets, even if the company disputed this.
The bank said that this would result in an unacceptable level of risk. "In fact, Ulster Bank was disapproving the draft," Mr Sreenan argued.
Justice Kelly asked Mr Casey if the company could in fact have produced evidence that the banks involved were in fact prepared to approve and underwrite the bonds. Mr Casey replied that Smart could not have done so in relation to the Huawei bond but could have provided it in relation to the other two.
Smart is seeking a declaration that ComReg is contractually obliged to give it the licence. The case continues today.
