Smart Telecom

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Smart Telecom

Type	Private
Founded	2000
Headquarters	Dublin, Ireland
Area served	Ireland
Key people	Brendan Murtagh, John Riordan
Industry	Telecom
Products	broadband, landline
Revenue	▲ €45.6 million (2005)
Operating income	▼ -€19.436 million (2005)
Employees	100+
Website	http://www.smarttelecom.ie/

Smart Telecom (AIM:SMR) is an Irish telecom operator that started as a phone card seller. It is also the third largest provider of cost-sensitive telecom services sector in Ireland, behind the incumbent operator Eircom and BT Ireland. It currently has an estimated 50,000 land-line customers and 18,000 broadband subscribers. It lost 20,000 land-line customers who reverted to Eircom in 2006.^{[citation needed]} Smart operates several services:

Point-to-Point, Transparent LAN Services and Telephony services across a Resilient Packet Ring backbone
Payphones (to 2006)
Broadband Internet Access
FTTH/IPTV services
Point-to-point Licensed Microwave Radio links

Backbone services are available to users in parts of Dublin, Cork, Dundalk, Limerick, Letterkenny, Galway, Sligo, Waterford, Wexford, Portlaoise, Mullingar, Carlow, Cavan, Drogheda and Clonmel .

1 Broadband service
2 Recent history
- 2.1 e-Nvi takeover and MPEG-4 headend
3 Problems in 2006
4 References

[edit] Broadband service

At the end of Q 1 2006 there were 322,000 broadband subscribers in Ireland, 35% of internet subscription. Broadband accounted for 19% of all internet subscriptions^[1]

Smart are probably most widely known for its residential broadband services, which launched in early 2005. The initial offering of fast broadband (for the time), which included completely free telephone line rental was considered revolutionary at the time and attracted huge numbers of customers interested in signing up to their service. Smart provides their broadband internet services through a process known as Local Loop Unbundling (LLU), whereby a telecoms company, for an agreed monthly fee to Eircom, the owner of the line, can take complete control of the copper cable running from the customer premises to the local exchange. Smart installs its own equipment in exchanges (a process which has proved to be slow and cumbersome and has caused massive delays in their rollout plan, with only a handful of exchanges currently available). Its broadband internet service uses ADSL2+ broadband technology, which gives them an advantage in that Smart can provide higher speeds to customers, as well as having a longer "range" on the line, allowing customers who previously were unable to get existing ADSL broadband due to being too far from the exchange to sign up to smart for internet. Smart equipment is provided by Huawei-3com, under the Aolynk brand. Smart use the DR814, DR814g and DR814q routers by Aolynk, dependent on the services being deployed (broadband, broadband with wireless router, IPTV etc.). The broadband is provided completely independent of Eircom, using high speed fibre MAN's throughout the country to connect from the local smart enabled exchange to their co-located datacentres across the country. For the telephony part of the broadband LLU service, Smart use VoIP to carry POTS (Plain Old Telephony Service) calls from their exchange to its core network. This has the effect of the smart service being slightly different from traditional POTS services through Eircom, mainly relating to dial tones and telephone ringing patterns.

As well as providing LLU broadband services, Smart provide connectivity to customers through FTTB, otherwise known Fibre To The Basement. Currently, only a very small part of the network, mainly apartment complexes, is FTTB, offering VoIP telephony, high speed broadband and IP Television services through a package known as SmartVision. Smart also provide payphones, which were previously run under the Esat BT brand, before they were sold off during the rebrand of Esat BT to BT Ireland. They also provide a CPS (Carrier Pre Selection) POTS telephony service and leased / dedicated fibre LAN lines for corporate customers.

[edit] Recent history

Smart was also a bidder for the Irish mobile operator Meteor following the decision of its parent company to sell all international mobile operators; however on July 21, 2005 it was announced Smart Telecom had withdrawn, leaving the company to be bought by Eircom, the largest telecoms operater in Ireland, and owner of the local loop throughout the entire country.

On November 18, 2005 Smart Mobile was offered the country's fourth 3G mobile phone network licence on November 16, 2005 ^[2]. Vodafone Ireland, O2 Ireland and 3 Ireland already had secured a 3G mobile phone network licence. Acceptance of the licence would require Smart Mobile to launch its services by April 30, 2007, with 33 percent demographic coverage by October 31, 2009 and 53 percent coverage by 2011.

The 3G spectrum access fee at €114.3 million, with an annual spectrum fee of €2.2 million and an administrative fee of up to €300,000 a year. Taking on a 3G licence would require substantial capital investment by Smart.

On November 9, 2005 Smart Telecom announced that it had raised €55.2 million in new funding. This involved a placing of new ordinary shares at a price of €0.20 per share and a debt equity conversion of €10.8 million.

But this licence was withdrawn in February 2006 by Comreg due to a failure by Smart to provide a €100 million performance guarantee bond in a form acceptable to it within the specified deadline. There was a significant drop in the companies share price subsequently ^[3] Smart is appealing the decision.

Smart Holdings Ltd lost a bid for to sponsor the weather forecast on RTE to Glanbia on April 7, 2006. The High Court ruled that its referential bid - based on a formula equivalent to the highest bid received +5% was not valid because RTÉ terms of offer did not permit this^[4]

[edit] e-Nvi takeover and MPEG-4 headend

In September 2007, Smart announced^[5] their takeover of e-Nvi, a Dublin-based Triple play provider. It also announced that it was investing in an MPEG-4 headend for its own Triple play service; the vendor was confirmed^[6] as Thomson in October 2007 .

[edit] Problems in 2006

Having head-hunted 49 managers from Eircom to promote and market broadband door-to-door, some as recently as five months earlier, the Chief Executive of Smart Telecom, Oisin Fanning fired 26 of them abruptly on August 31, 2006. This took place in the context of unmet sales targets of 64,000 sign-ups, aggravated by Smart being unable to get its equipment into many Eircom exchanges which meant that Smart had no product to sell in many parts of Ireland^[7].

Smart Telecom (SMR.L) shares traded at 9c in early September 2006, less than two thirds of their floatation price. Sales for 2006 are anticipated to reach €60 million - up from €45 million in 2005. However losses of €23 million in 2005 are anticipated to be eclipsed by losses of €35 million in 2006. Management efforts are predicated on challenging the Eircom monopoly but this requires substantial funds to purchase appropriate telecom exchange equipment. A rights issue of €30 million in 2005 was underwritten by Brendan Murtagh, a Kingscourt County Cavan native who is a director of Smart.

Future prospects will be defined by the achievement of substantial growth in broadband sales volume and eliminating losses, heralded promises which stakeholders, including Seán Quinn, have been waiting patiently to emerge.

[edit] Chief executive resigns

Oisin Fanning, chief executive resigned from this position on September 9, 2006 on health grounds. Further senior resignations are pending. The acting chief executive, Ciaran Casey, is to carry out an in-depth financial review of the company as a further investment of €30 million is sought.^[8].

The chairman of the company, Raymond Kings, has stated that Brendan Murtagh, the largest shareholder in the company will continue to provide short-term working capital while longer term funding options are being investigated.

[edit] Divesting non-core businesses

Details of a strategic review, published on September 22, 2006 mean that the employee cohort will be cut from 348 to c100, additional loan funding is to be provided by major shareholders and the company will divest its payphone and pre-paid call card businesses so as to focus on its corporate and residential broadband businesses^[9].

Revenue in the six months to the end of June 30, 2006 dropped 15% to €20.3 million. There was a 61% increase in administrative costs leading to a loss, before exceptional items, of €17.9 million and an operating loss up to €31 million.

[edit] Eircom's termination of service

On October 2nd 2006 Eircom, owed €4m by Smart, including arrears of €1.7m, ceased providing wholesale services to Smart Telecom. The result is that the majority of Smart Telecom's customers could not make outgoing calls (except for emergency numbers). According to RTÉ news[1] at the time almost 45,000 customer voice lines were cut off, and Eircom was in the process of disconnecting approximately 17,000 broadband customers. Smart issued a notice on their website stating that full service would be restored as soon as possible but declined to give any date for such a restoration.

Shortly afterward, Communications Minister Noel Dempsey called on Eircom to reconnect a full telephone service to Smart customers.

Comreg has announced an interim measure where phone lines to Smart customers will be reconnected and they will be given the option to join other providers.

[edit] Resolution

It was revealed on Friday, 6 October 2006 that BidCo, a company controlled by Brendan Murtagh, its largest shareholder, will purchase all of the company's assets, and will also take on its estimate €40m debt.^[10] This will also reportedly allow broadband service to be restored immediately. It has been confirmed Smart will dispose of the "calls only" packages, but will continue to provide call services to broadband customers.

In an email to customers on the same day, restoration of telephone and broadband services was announced along with a free upgrade of 3 Mbit/s to all broadband customers for the remainder of 2006 as a token of their appreciation.