The death of Smart Telecom was caused by the LLU market failure

Network operator Smart Telecom recently announced that it was filing for examinership and has place the blame directly on the market failure of Local Loop Unbundling (LLU) as the reason for it closing its doors.

Smart telecom made a big entrance into the market for fixed line services in Ireland at the beginning of the decade with Oisin Fanning as its boss, with 18 000 broadband customers and almost 50 000 fixed line customers signed up for its services and unbundling carried out on 40 local exchanges.

The company later lost its licence as a preferred bidder for a fourth 3G license in Ireland following a previous failure to pay a €4 million bill that was outstanding with the Irish incumbent Eircom, which led to its fixed-line connection being cut off back in 2006.

Following huge losses of €55.6 million the company’s founder Fanning was replaced by businessman, Brendan Murtagh who took the company over.

In order to repay its creditors Murtagh went on to raise €39.5 million, although this year saw Smart Telecom cut its workforce down from 90 staff to just 30 due to further losses in trading incurred that meant it was unlikely that the company would be able to achieve a positive cash-flow or any kind of profitability.

Bids to buy the assets of Smart Telecom for between €12 Million and €15 million had been put on the negotiation table by Planet 21 and Complete Telecom until recently.

A difficult regulatory framework for Irish network providers offering fixed-line connections was the reason given for Smart Telecom filing for examinership according to Magnet Networks, the company’s main competition in the independent telecoms and broadband market.

Mark Kellett, the CEO of Magnet Networks recently said “While Smart had internal funding issues over a number of years, we believe telecoms regulator ComReg has to take some responsibility for the company’s current state.”

He went on to add “The slow pace of reform of regulation has ensured that only the best funded companies can survive and compete against the incumbent. With the financial backing of its parent CVC, Magnet has been able to build out the largest alternative LLU network in the State, but it is obvious that other operators without this investment may be at risk from a poorly regulated market. We call on the Minister to immediately examine the market in the context of today’s announcement from Smart.”

Source – Silicon Republic