Wednesday, 31 May 2000
Dáil Eireann Debate
notes, in particular, the mini-prospectus statement that “Comsource, KPN Telecom and Telia have agreed not to sell any of their shares for a period of 6 months from the completion of the offers, but will be free to sell their shares thereafter by way of a stock market offering or otherwise. In addition, each of Comsource, KPN Telecom and Telia have agreed not to acquire any additional shares for a period of 18 months from the completion of the offers, provided that KPN Telecom is not restricted from increasing its shareholding in the company to a level not exceeding 29.9 per cent”;
notes the board of the company's agreement in a transparent manner to the issue of a prospectus, including a full price range in advance of the offer;
notes the fact that the Eircom share price equalled or exceeded the flotation price on all but 38 out of the 233 trading days since flotation.
–(Minister for Public Enterprise.)
Mr. Rabbitte: The Minister's speech has received a very easy ride in the press so far. When people have had time to study it, however, the  reaction may be considerably different. The Minister traded on a few facile, basic premises, one of which was that shares go up and shares go down and that she could not be held responsible for the vagaries of the market. She was right, but in this case we start from a fixed price, a price fixed, according to Mr. Alfie Kane, by the Minister after huge mind-boggling sums of money had been spent on advising her and others surrounding the flotation of Telecom Éircom. The result is that hundreds of thousands of ordinary citizens who dabbled in shares for the first time have got their fingers burnt. It seems that these people were entitled to rely on the very expensive advice that the Minister received and on her own manifest enthusiasm for the flotation.
My colleague, Deputy O'Shea, drew attention to the amazing amount of money – £40 million – included in the original Book of Estimates for a panoply of advisers for advice surrounding the flotation. A Supplementary Estimate had to be introduced to provide for the payment of a further £40 million, giving a total of £80 million. In terms of this being a lesson for the future the question has to be raised as to whether advisers had a vested interest given that they were on a percentage for the second £40 million.
What price was agreed by the Minister when the sum of £40 million was included in the original Book of Estimates? This sum could not have been provided for unless the Minister had a price in her head. We do not know what the figure is but it appears that the advisers had a vested interest in the revaluation of the original price—
Mr. Yates: There was no underwriting risk; it was oversubscribed.
Mr. Rabbitte: That is correct. What went up in terms of the valuation of the company also went up for the advisers. We still do not know the details.
Mr. Alfie Kane has told us for the first time – this is news – that the company was overpriced by comparison with its peers by 30%. If there was a 30% premium would-be purchasers were not told. What did the man and woman in the street believe? They thought that they were investing their savings, for the first time in shares, in response to a mood of ecstasy generated by the Minister. The environment of hype, balloons and hoop la surrounding the flotation must be recalled. The people were bombarded with hard-sell advertising that cost the taxpayer a fortune. It was relentless, pervasive, seductive and calculated to persuade the unsuspecting punter that this was really a kind of government stock and that he or she could not go wrong, that he or she was on a safe bet. The atmosphere of champagne bubbles, giggly photo opportunities and mad dashes across the Atlantic attracted unprecedented interest from citizens who had not pre viously purchased a share but they bought the message.
Mr. O'Flynn: They did not have to.
Mr. Rabbitte: The mammy of the nation would not mislead them; it was a safe bet. The Minister behaved as if she was giving out Smarties – Fianna Fáil Smarties at that.
Mr. O'Flynn: No one put a rope around their necks.
Mr. Rabbitte: The Minister is now falling back and pointing to the mini-prospectus which she claims made it clear that Comsource, KPN and Telia, were not long-term partners. This is disingenuous for two reasons and I am surprised that the media have not bothered to look behind or research it in reporting what happened here last night. The proposition that the small print of the mini-prospectus superseded the hype and hoop la led by the Minister is nonsense. Where is there a speech or press statement by a Minister or by anybody on behalf of the company drawing attention to the opaquely worded paragraph in the mini-prospectus quoted by the Minister? There is no such statement. The intended inference was the opposite.
Is the most populist of all populist Ministers seriously arguing that the typical first-time share purchaser seized on the small print of the mini-prospectus rather than being dazzled by the colourful rhetoric of the Minister as she elbowed Alfie Kane out of the photograph? One could not seriously suggest this. The hundreds of thousands of first-time share purchasers who are not familiar with the ways of the Stock Exchange or mini or long prospectuses did not read the small detail, rather they depended on the mammy of the nation telling them that this was a safe bet. All she was short of doing was wheeling her wheelbarrow down Moore Street and selling shares off the back of the barrow. That was the approach adopted.
The mini-prospectus is a reduced version of the long prospectus which states at page 62:
In January 1999 the Governments of Sweden and Norway announced their intention to merge Telia and Telenor which had certain interests in telecom companies in Ireland which compete with us. If the merger is completed or if Telia believes that the conditions to the merger will be satisfied and that the merger will be consummated Telia has informed us that either it will dispose of its interest in us or Telenor's competing interests in Ireland will be disposed of to avoid conflicts of interest. We have agreed the principal terms under which Telia may withdraw from the strategic alliance and negotiated with KPN a new strategic co-operation agreement which will take effect if the withdrawal of Telia occurs.
 That conveys the exact opposite to what the Minister sought to convey. The principals to the agreement were agreed that KPN would take up the Telia shares. The Minister conveyed the opposite. It should not be forgotten that KPN and Telia (Comcourse) were described in the prospectus as strategic partners. There is nothing temporary about strategic partners. They were there for the longer haul. During her speech last night, the Minister quoted the mini-prospectus which stated, “In addition, each of Comsource, KPN Telecom and Telia have agreed not to acquire any additional Shares for a period of 18 months from the completion of the Offers, provided KPN Telecom is not restricted from increasing its shareholding in the Company to a level not exceeding 29.9%”.
The whole environment being created was that this was a permanent strategic alliance, they were in for the long haul and the terms of any take-up of Telia's shares by KPN were already agreed. The Minister flew around the world with poor little Alfie Kane hemmed in between her and Ray MacSharry portraying this as a Fianna Fáil give-away to the people of Ireland like it was giving out Smarties. However, it has all gone wrong.
Acting Chairman (Mr. McGrath): I call Deputy Michael Kitt. The Deputy is sharing time with Deputies N. O'Keeffe, O'Flynn, P. Carey, Power, C. Lenihan and McGuinness, in that order. The Deputies have five minutes each.
Mr. M. Kitt: I support the Government amendment and find it difficult to understand why we are holding this debate which attacks the Government and the Minister. Eircom has been in private ownership for almost a year and has hundreds of thousands of shareholders drawn from every walk of life.
It is difficult to understand how anyone could give a commitment to the effect that the shares of a floated company would never drop in price. That could not happen in any country. No one would make such a commitment and the Minister did not do so at the time of the Eircom flotation. There are strict laws regarding companies on the Irish and international stock exchanges which would have prevented her from giving such a commitment, even if she wished to do so.
There has been some controversy surrounding this issue and I would be concerned if the effect of that controversy is to apply downward pressure on the share price. I wish to comment on the prospectus issued on the Eircom flotation. That prospectus was the responsibility of the board and contained a chapter on risks which fairly set out the risks associated with investing in Eircom shares.
The mini-prospectus referred to by the Minister noted that the value of the shares could be adversely affected. In particular, it referred to increasing competition in the fixed line services market and the entrance of a third mobile telephone operator which would increase compe tition in the mobile communications services market.
I have spoken to many Eircom workers who are concerned the competition may not be operating on a level playing pitch, even though they welcome that competition. These workers point out that other telephone companies require information on applicants' bank accounts and credit worthiness, while Eircom is prepared to provide a full service without such information. The company is dependent on continuing its good relationship with its employees and their trade unions, and I compliment them on the work they are doing.
The fall in the price of Eircom shares has left more than 500,000 Irish investors with losses of 20% on their original investments. However, the institutional offer was over-subscribed 16 times, even at the top of the price range. The Government received advice from Merrill Lynch to float the shares at £3.27 and Merrill Lynch is now advising Eircom. The launch price was lower than £3.27 at £3.07. After the flotation the share price rose by 20% and shares have traded well above the flotation price most of the time.
The Minister pointed out that the share price has been below the issue price on only 38 out of the 234 days since the launch. It is interesting that the Eircom chief executive officer held his peace for those 234 days. When the shares fell in price he stated they were over valued. However, we could have made some money if he told us that last year as modest investments, such as mine, could have been sold.
The company had a strong balance sheet at the time of the flotation. The price set by the Government was on the basis of what the market was prepared to pay and on expert advice. The Government tried to balance the need for a fair price for taxpayers with a fair return for retail and institutional investors. The potential returns to Eircom investors have been available against the background of a market which has been sluggish, at best, or in decline since the flotation.
Sentiment in stock markets has turned against European telecommunications stocks in recent months as high technology companies in general have suffered sharp declines in share price. The sums paid for the third generation mobile telephone licences in the UK massively surpassed initial expectations and companies such as British Telecom, Deutsche Telecom and France Telecom are off their share price highs in 2000.
This motion is not about the fundamentals underlying the Eircom flotation. It has been tabled without regard for the interests of the company's shareholders and seeks to use present market conditions for cynical ends. I support the amendment and the Minister's handling of the flotation.
Mr. O'Flynn: The Opposition is crying wolf again. It has nothing else to debate but the affairs of a publicly listed company which is now in private ownership. All shares carry risks and  there are no guarantees. I am in business a long time but last year was the first time I purchased shares when I bought Eircom shares. No one forced me to buy the shares. I knew I was taking a risk. I read about the Wall Street crash and other stock market crashes, and I knew I could have sold the shares and made a profit of 23% when they reached £3.70.
Mr. Yates: The Deputy can afford such a loss.
Mr. O'Flynn: I could have made a handsome profit instead of leaving my money in the bank at 2% or 4%. Ordinary shares such as Eircom have shown the best capital growth over the past ten years and I am advised they will be better than property over a ten year period.
All shares, even bank shares, go through peaks and troughs. Eircom shares were below the flotation price on 38 out of 238 days since they were floated. They rose rapidly after flotation, decreased during the autumn and winter and rose again in February 2000 to almost their highest level.
Ordinary shares such as Eircom are in for the long haul. The recent slump is over and the price is rising daily – up 12 cents since yesterday. I am going to purchase more Eircom shares as this is a profitable company with a sound history.
Mr. D. Carey: Is the Deputy setting up a brokerage?
Mr. O'Flynn: I am looking forward to the forthcoming dividends. I have two forms of shares and I am looking forward to the loyalty shares to be issued in July. One has to understand that share prices fluctuate up and down as a result of factors unconnected with a company. It could be fashionable to buy telecommunications shares today, IT shares tomorrow and bank or commodities shares next week. Shareholders should not panic but look to the long-term investment. That is the message we should send out rather than blaming the Government for matters outside its control. The performance of the market and the company will determine the future price of Eircom shares.
I am not sure if Senator Ross is an Independent or a member of a party, but I agree with his assertion that Eircom shares will be seen as an historic steal in years to come. I am keeping my shares and I am buying more, and I am going to reap a harvest like all those who bought shares.
Mr. Yates: It is a bull market for the Deputy.
Mr. O'Flynn: Each party to a flotation has its own agenda. Management will be concerned with all aspects of the presentation of the company to the public and the price at which the company is floated. It is obvious the lower the flotation price the better the performance of the company and, by extension, the management's profile in the period after the flotation.
In those circumstances, it would be naive to  characterise the view of management as being objective.
ABN AMRO, which acted as advisers to the company during the flotation, was a member of the bank syndicate which sold and acted as underwriters for the offering on behalf of the Government. If it did not believe the price of Eircom shares was reasonable, why was it prepared to sell the shares and underwrite the offering?
Criticism has been made of the use of book-building as a means of setting a price at flotation. I am advised that the use of a book-building process, under which orders are taken from institutions across a price range as a basis for setting the final IPO price, is the most widely used method of undertaking IPO pricing. This is because the book-building method yields an IPO price that best fits prevailing market conditions and demands. I got that advice from different brokers today.
Mr. P. Carey: I am not one of those who wakes up in the morning wondering about the prices of shares quoted on the FTSE, the Nikkei or the other economic indicators. It is naive in the extreme for the Opposition to talk about the ups and downs of Eircom shares when the world knows that the telecommunications industry is changing dramatically. Vodafone and Orange in the UK, Deutsche Telekom, KPN and Telia are all undergoing dramatic changes. That is as it should be in a rapidly changing industry.
As other speakers said, people who invest in shares run the risk from time to time of getting their fingers burned. I suspect those of us who bought a few shares – I bought the minimum number – invested in them for the long haul and as much out of a sense of national loyalty as anything else. I did not expect that I would make a small fortune immediately from my investment in Eircom shares. I am concerned about the number of people who borrowed heavily and who may still retain those shares. The majority of people who borrowed to buy the shares offloaded them fairly quickly.
We are new to this business.
Mr. Hayes: Some of us are.
Mr. P. Carey: Some of the building societies were floated. The AA gave me a dividend of few bob and some other Members may have got a similar dividend, if they voluntarily joined it a number of years ago. We are only beginning to put our toes in the water.
It is pity the Opposition is availing of this opportunity to send out a message that can give investors erroneous perceptions of Eircom. The Government and Opposition are committed to a process of privatisation of other public sector companies. Therefore, it is important to maintain investor confidence. What we say at this juncture could potentially damage the company and, in particular, the interests of the shareholders. The  responsibility for any share price fall, and I hope that will not happen, lies fairly and squarely with the Fine Gael Members opposite. One cannot make a commitment that the shares of a floated company will not drop in price.
The Opposition motion seeks to censure the Minister and the Government partly on the basis that the offer documentation failed to make full disclosure of the position of the strategic partners. I strongly suspect that the majority of people do not read the small print in many of these documents. The small print was not that small. It was clearly indicated that the share price could go up as well as down. Sadly for those supporting the motion, the facts were made clear in the main prospectus and the mini-prospectus. The mini-prospectus was distributed to the 1.2 million people who registered their interest in purchasing shares. It stated that Comsource, KPN Telecom and Telia agreed not to sell any of their shares for a period of six months after the completion of the offer, but would be free to sell their shares thereafter by way of a stock market offering or otherwise.
Mr. Yates: The next sentence is the interesting one.
Mr. P. Carey: One does not get matters set out much more clearly than that. Deputy Yates can pick out virtually any sentence from the document and interpret it whatever way he wishes and he has an awful habit of doing that.
Mr. Yates: The next sentence proves that KPN was going to buy Telia's shares.
Mr. P. Carey: The mini-prospectus goes on to state that in addition each of “Comsource, KPN Telecom and Telia have agreed not to acquire any additional shares for a period of 18 months from the completion of the offer provided that KPN Telecom is not restricted from increasing its shareholding in the company to a level not exceeding 29.9%”. The offer documentation went beyond fully disclosing the position of the strategic partners. It also indicated the influence that decisions made by the strategic partners could have on the share price developments. The offer documentation did this in the context of setting out fairly the risks associated with investment in Eircom stock.
I hate to bore Deputy Yates with these facts, but the mini-prospectus states that one should carefully consider the risks described and the information in the prospectus before purchasing shares. It states that the value of one's shares may be adversely affected by general market conditions and/or the possibility of further stock market offerings of the shares by, among others, KPN Telcom and Telia. It stated further that there could be no assurance that the shares would trade in the stock market subsequent to the offers at or above the price at which those shares were sold in the offers by the Minister. The mini-prospectus  stated also that if any of the risks summarised occurred, the company's business, financial condition or results of operations could be materially adversely affected and the trading price of shares could decline. That demolishes the argument made in the motion on the lack of disclosure by the selling shareholder.
Mr. Power: I state my interest in the shares. My wife and I purchased a number of Eircom shares of which we have since disposed. It is incredible this matter is being discussed in the House. Deputy Yates called on Minister for Public Enterprise, Deputy O'Rourke, to apologise to Eircom shareholders for the poor price of the shares.
Mr. D. Carey: She should also apologise to the taxpayers.
Mr. Power: The Minister defended the Government's role in this matter last night, on the airwaves and in the print media over in recent weeks. The only person who should apologise to Eircom shareholders is Deputy Yates for tabling this motion. When Eircom was floated last year, it attracted much publicity.
Mr. D. Carey: At our expense.
Mr. Power: Most people viewed that flotation as an opportunity to make a few pounds. Commentators agreed with Deputy Yates that this investment would be a sure bet. The banks were throwing money at people. It was never as easy to get money from the banks as it was to buy shares in Eircom,
Mr. D. Carey: That shows how smart they are.
Mr. Power: If investors were greedy, they had an ample opportunity to sell their shares and make a profit on their investment. Some investors who held on to their shares may have felt they missed the boat and I accept that many investors may have been investing for the first time and did not know when to sell. Many of them face that difficulty today.
The shares were floated at £3.90 and rose by more than 25% on the first day of trading and for more than 80% of time since the flotation Eircom has traded at or above its share price. Setting the price for Eircom shares was a very difficult task for the Government. On the one hand, it had to ensure the interests of the Exchequer and the taxpayer were protected, thus ensuring that the best price was secured. On the other hand, the Government had to ensure that the price was sufficiently attractive to ensure there was a strong demand for the shares. The Government struck that balance and it is madness to say otherwise. If Eircom's share price was overvalued, why has it taken the market so long to realise that? We can all be wise today. If the thousands of Eircom investors knew last year that Eircom's share price would be £3.20 today, I am sure they would not  have invested, but that is a risk people take when they invest in the stock market.
Members referred to the mini-prospectus. It clearly set out the risks involved and potential investors were asked to carefully consider these risks before making their investments. Deputy Yates expressed concern for the investors who are now carrying paper losses of approximately 20% on their original investments. By highlighting the Eircom price in such a negative manner, it will only serve to depress the price even further. It is down 5 cents today. I am not attributing that to Deputy Yates, but this motion does not help matters.
Mr. Yates: It went up yesterday.
Mr. Hayes: We are watching closely.
Mr. Power: There are many small shareholders and they should not consider selling their shares as a result of the negative comment from this House.
Mr. D. Carey: That is the problem.
Mr. Power: The decline in the value of technology shares has depressed the telecommunications sector and it is only natural that the Eircom share price would also suffer.
Mr. D. Carey: One would expect that.
Mr. Power: The comments of the chief executive will not offer much comfort but the shareholders should not panic. The turbulence will continue for some time. If I was to put my money down I would say that shareholders who are prepared to wait will be well rewarded.
Mr. C. Lenihan: At the outset I should declare an interest.
Mr. Yates: The share that did so well.
Mr. C. Lenihan: Prior to my election I worked as a senior executive in Esat Digifone and I am still retained by that company as a corporate adviser. I have no prejudice against Eircom. This debate has been infused by the contributions from Deputies Yates and Rabbitte which can only be described euphemistically as populist guff. It is strange how the Opposition, when struggling to find an issue on which to pin down the Government other than the events in Dublin Castle, reaches—
Mr. Yates: The Deputy is on a winner with Esat.
Mr. C. Lenihan: —benignly to the defence of the poor afflicted Eircom shareholder. Is that what politics has been brought to? The Opposition has been hysterical and irrational in its attempt to exploit the poor performance of the Eircom share price. Fine Gael and Labour are  acting like chat show hosts, indulging the public in false and unwarranted expectations about what can and cannot be achieved. The Labour Party, in particular, having abandoned socialism is clearly in favour of selling the family silver and, to make matters worse, it seems to advise the selling of the family silver at a double discount.
From my humble background in telecommunications and journalism, and now in politics, it has always been my view that if one is a Minister charged with selling a public asset one should realise the maximum amount for the taxpayer from that asset. That is precisely what the Minister and the Government have done in relation to Eircom. A price was achieved on launch and a successful flotation occurred. The Government cannot be responsible for an asset it has sold. Eircom will no longer be an incumbrance on the public purse and that is as it should be. There was no guarantee of a high or middle range pricing of the Eircom's share price. It is interesting to note that Merrill Lynch advocated a higher value while AIB opted for a lower value and the Government, rather pragmatically, went for a figure in between.
Eircom was an interesting but dangerous bet for any investor. That is not to say I did not invest, not because of any inside knowledge or great claim to knowledge about the industry.
Mr. Yates: Esat shares went up 25 times. The Deputy is too modest. It is not like him.
Mr. C. Lenihan: My good friend and former employer, Denis O'Brien, has gone from controlling a company which was a loss maker with massive debts to one for which somebody would offer him £250 million for his shares. It is a turbulent, changing, difficult industry with serious challenges for former monopoly utility players, such as Eircom. They are not as attractive today as prior to the Eircom flotation. The sentiment of the analysts in the industry has moved towards mobile telecommunication companies which are seen as a neater way of getting into the higher added value areas of the Internet, for example.
It is ironic that the Labour Party should pursue what can only be described as a Thatcherite agenda, complaining about the sale of the family silver, as Harold Macmillan accused Mrs. Thatcher of attempting to sell the family silver. It is unique and interesting and a sign of the times that the Labour Party is no longer complaining about the sale of the family silver but merely the price. That says much about what is being said here this evening.
There were two stark choices for the investor in Eircom, the short-term view or the long-term view. One was to invest either for the short-term, realising the short-term profit as happened in the case of the Eircom share price and getting out reasonably early, or for the long haul. The long haul is a difficult one for this company. While the company has huge value in it as a company, it has  huge problems in terms of staffing and fixed line costs. If Eircom decides to sell off to an investor the shareholders will gain on the double. If a major predator decides to gain market share in what is essentially a small market here then the investor would be well rewarded.
Mr. McGuinness: I welcome many debates but this debate is the worst piece of political opportunism I have witnessed from Fine Gael since my election in 1997. The debate has done untold damage to the image of Eircom and will make it more difficult for Alfie Kane and those responsible for the operations of Eircom to roll the stone back up the hill. This is a position for which Alfie Kane and the management are responsible because they decided at an early stage in this debate to participate from the sidelines. That should not have happened. They have been diverted from the real game which is to ensure Eircom share prices go up, that a strategic partner is found and that a course is plotted for the future. Essentially, what they have done to date is to plot a course which is bringing that share down. They are fumbling at a time when they should be positive.
The Opposition has led them into this position by this nonsensical and daft debate about the manner in which the shares were floated. We should not be talking about how the company is being run. It is out in the private market and is subject to market fluctuations. The manner in which the Minister brought this about is to be commended. She sought the best advice and was advised at one stage to sell for more. She took both sides of the argument into account, took note of the advice from Merrill Lynch and decided to go for a middle of the road value. That was a sensible approach. She has served the taxpayer and the Government well.
It would be well for the Opposition to leave Eircom alone. One of the remarks made during the debate was how the public will react. I do not know what public the Opposition speaks about. I am not one who buys shares and I have not bought Eircom shares, but I am aware of the markets and that they can go up and down. Most of the punters who take a stake in shares of one kind or another are not afraid of what is happening because they realise more than the Opposition that the market will settle the final price of these shares. Given the developments that have taken place technologically throughout the world, these shares are set to go up in value.
One of the Opposition's own, black sheep though he may be according to the Opposition, Senator Shane Ross, wrote a fine article on the whole issue. He gives more credit to the general public than the Opposition, which should take note of what it is saying and perhaps replay it over the next week. The Opposition should understand from this debate that it has lost the plot. The general public knows where these shares are going but above all it knows where the Opposition is going.
 The Opposition has come from nowhere. It has used this debate to place Eircom in a serious position and has not helped it in regard to its flotation It has thrown Eircom off the ball and Eircom will pay the price. I commend the Minister. She has adopted a positive approach and when the dust dies down after this debate, the public will see through Fine Gael, and buy shares and participate in the markets. They are fully confident of their position, but the Opposition do not seem to be confident of its position.
Acting Chairman: I call Deputy Olivia Mitchell. I understand she is sharing time with Deputies Hayes, Perry, and Lowry. The Deputies have six minutes each.
Ms O. Mitchell: I share the concerns expressed yesterday by my colleague, Deputy Yates, about the way in which this issue was handled, the consequences for the half a million citizens who bought shares and, most important, the implications of the misjudgment and mishandling of this, the first of a whole wave of privatisations, for future planned flotations. This was the most important one and the one that had to be right. That did not mean maximising the return to the Exchequer on this occasion. This was about taking the long-term view in getting the balance right and ensuring that the public had confidence in flotations by the State.
It is difficult to understand how, with all the hype surrounding this flotation, the preparation that went into it and the advice that was available, at a staggering and incredible cost of £73 million to the State, the Government should now have to answer such fundamental questions about the management of the issue.
I am not suggesting, as many on the Government side seem to think, that somehow the Government could have foreseen a Europe-wide drop in telecommunications shares. That is not what we are discussing. The reality is that Telecom Éireann shares were issued at a premium to the market of 30% and the public were not told. They are now trading at a discount to the general market. That could lead a reasonable person to the conclusion that the IPO was set too high. For this advice we paid a lot of money, or the Minister paid on our behalf.
The Minister for Public Enterprise yesterday also sought to lecture us on the dangers of this debate for the share price. This is to misunderstand that what we are discussing here is the danger in which the Minister herself placed this share at the time of issue. The only danger to the share price now is criticism of the current management of the company and the Minister is leading the charge. I heard some of her Deputies saying things last night that will certainly affect the share price. The Minister has an unfortunate relationship with her chief executive officers, or her former chief executive officers, not just the one in question here.
The public depended on the Minister for sound  advice and that is what she owed to the public. She owed the public full disclosure of all of the facts. It was up to her and that was her vital function in this matter. She was targeting not experienced institutional investors but ordinary citizens, many of whom had never bought shares before, many of whom had to borrow the money to do so and had certainly not had any contact with the stock market before. These were people who were targeted by the Minister. Everybody over 18 got the glossy brochure.
The two issues raised by my colleague, Deputy Yates, yesterday were not answered by the Minister. The first was about the intentions of Telia and KPN. It is all very well to point out that the prospectus told us, in the small or big print, that they could not sell for six months and that they could not buy for 18 months. What the Minister did not tell us is whether she knew at that time that they had no interest in remaining as strategic partners under the conditions which were being imposed and that there was, therefore, every likelihood that there would be an overhang of shares to be disposed of later on and that this would have implications in driving down the share price.
The second matter with which the Minister did not deal was whether she made full disclosure as required under the rules of the Stock Exchange about contrary advice which may have been available from ABN AMRO Rothschild. Her response was that the report was a private one to Telecom Éireann itself and that it, therefore, could not be published. This makes no sense. At the time this was a public State-owned company. The State was the major shareholder and, by definition, it could not have a private report, certainly not a report that could be kept private if it contained information necessary to potential investors to help them make informed decisions.
Furthermore, the Minister said repeatedly last night the price was set at the level the market was prepared to pay. Let me bring her mind back to what actually happened. In an extraordinary device the public had to decide how much to buy prior to being told the price they would have to pay. In a real market, the buyer and the seller have the same information. In this case the seller knew the supply, the demand the price. The buyer had none of this information. That is not a market in any real sense. In these circumstances, there was no risk to the Minister for Public Enterprise, no risk to the Minister for Finance and no risk to the underwriters. No wonder they chose to pitch the IPO at a higher level when they had full information about the demand for the shares. They could not lose.
I hope – and I know that others share this view and I should declare that I was one of the unfortunate people who bought these shares too – that the underlying essentials of this company are sound and that eventually it will come right for all investors, that eventually the glossy brochures and the heavy sell and the balloons and the champagne will all be justified and that all the investors will have reason to celebrate. Right now  the only participant celebrating is the Department of Finance which extracted the very last penny from ordinary members of the public. However, even it will not be celebrating for long. In the market, as in politics, perception is everything and right now the perception of the public is that they were duped. In money matters, as in politics, the public have a long memory and they will not be duped again so readily. The questions surrounding this flotation have damaged the potential of all future planned flotations. The country will be paying again and again into the future as a result of the mishandling of this flotation.
Mr. Hayes: It is clear from the Minister's tirade last evening that she has a difficulty with the concept of political accountability. The motion in the name of my party seeks to find out from the Government the truth about the flotation of Telecom Éireann last year. Specifically the House, the public and Eircom shareholders want the Government to account for its actions in respect of the Telecom Éireann flotation. Despite the Minister's protests to the contrary, it is legitimate for the House to express a view on the handling of the Telecom Éireann flotation precisely because politicians decided the strategy that was put in place. The motion has already shed much light on that strategy. Setting the price of the shares was a political decision. To suggest, as have some of the “Gordon Gecko's” on the other side of the House, that this should not be a matter of public discourse to be debated in the House is nonsensical.
Last week this latest saga was sparked by the comments of Mr. Alfie Kane. Curiously, there was no reference to Mr. Kane in the Minister's speech in the House last night. She sent some of the lower orders here tonight to pour scorn on Mr. Kane. It is a pity she would not say what she has to say to his face. There can be little doubt that the comments of Mr. Kane on this issue express considerable dissatisfaction at the manner of the Telecom Éireann flotation.
To suggest that a matter of serious conflict between a semi-State company which was recently floated on the stock market and the majority shareholder, in this case the Government, cannot be discussed in Dáil Éireann is a bizarre notion. I would remind Minister O'Rourke that she had no difficulty in berating Eircell, a wholly owned subsidiary of Eircom, in the House some months ago when its network coverage collapsed for a time causing untold inconvenience to its customers. On that occasion, the Minister cut loose on the mobile phone operator demanding, no less, an apology from the company. The Minister was singing a different tune last evening when she said “I shoulder a . reluctance to trade words across this House about a private company”. No reluctance was shown when Eircell was treated to a dressing down from  the Minister some months ago. Times change, as do Ministers and their arguments.
The goalposts were changed over the weekend when it became clear that the flotation decision was taken by a high-powered Cabinet sub-committee. It is clear that the headmistress of Carysfort does not want another disaster pinned to her political epitaph. Last night's speech was an attempt by the Minister to save her reputation in a Department where major decisions on public infrastructure have stalled during her period in office.
Many within Fianna Fáil, particularly in its back bench team, see some similarities between the Minister, Deputy O'Rourke, and Margaret Thatcher. Both have a good reputation as good listeners and as persons who understand the subtlety of debate. However, they are different in one blatant respect. When Mrs. Thatcher sold off the family silver she did so at a price that encouraged ordinary people into the market. From the evidence we have heard in recent days this Minister and her Government viewed the Eircom flotation in a different light.
What is most damaging in this debacle is that it puts at risk the future sale of other semi-State companies. As the hype of last summer died away thousands of small investors had their fingers burned in the Eircom experience. People with £4,000 or £5,000 to invest saw Eircom as a safe bet following the well-financed PR campaign before last July. The Government's decision to over-price the share could have a detrimental effect on the pension plans of many investors.
There is a fundamental difference between a fair price for the sale of a public utility in order to guarantee the strategic future of that company and a bloated share price which does not reflect the market reality. Having siphoned off a large percentage of Eircom shares for financial institutions, a mere 30% of the holding was granted to small investors. The blatant fixing of the share price by the Government has hit small time investors hardest. The question must be asked whether Eircom shareholders would have purchased shares in such numbers had they known the more cautious advice that was given to the company and the Government last year. People were duped and the full facts were not known to many small investors.
This scandal will have drastic consequences for the sale of other semi-State companies and, more crucially, for the medium to long-term prospects for Eircom and its shareholders. The key issue in this debate is who knew what and when. There can be no doubt the Minister, her Government colleagues and the board did not inform future investors in Eircom about the likely selling out of the shares by KPN and Telia.
Mr. D. Carey: They did not understand.
Mr. Hayes: It is quite clear from the mini-prospectus that was not laid bare to the vast majority of people who wanted to invest.
 One of the reasons for the deflated price in recent months is that a substantial amount of the shareholding was sold off by a large institution that managed to get its hands on the shares originally. It is quite clear that large institutions and companies got the best deal but small time investors got the worst one and are now paying the price. If there is not political accountability and if we cannot raise the matter in the House, what can we raise?
Mr. Perry: I compliment Deputy Yates on raising this very important issue. The Government's statement that the company is no longer its responsibility is disingenuous because Eircom was mis-sold to investors. Eircom advisers were paid £58 million, over £180 for every shareholder, to set a price. They got their money but the first-time novice investors have lost more than 20% of their stake in less than a year. Government speakers have said that is a risk people take but we are talking about novice investors who never held shares previously. There was a high profile publicity campaign on RTE. Last week Mr. Kane said that it was known that the price set by the Government was 30% above the prevailing value at the time. The option of free shares was an incentive and a decoy to get people to hold on to their shares. They are not free shares. As things stand, those shares are costing people money. People are losing money. Eircom is one of the worst investments in Irish corporate history.
The over-pricing of Eircom shares was an astonishing political blunder that will have severe repercussions for Irish investment. We are talking about the future off-loading of State assets. I am quite sure that none of the 488,000 shareholders will invest in them – they would have to be masochists to do so. A share buying culture aimed at companies could have been fostered in a generation of Irish people creating a rich pool of capital for Irish businesses, building enterprises and creating jobs. Banks openly gave loans to people to buy shares. People borrowed large sums of money and went into debt only to discover they made a substantial loss. The banks are getting their money on the loans.
Many shareholders have had their fingers burned. They will not forgive the mis-selling of this asset. They were told “Live horse and you will get grass. This will come right in time”. People are losing 20% and it is projected that the value of the share could fall as low as 2.50. Banks and their advisers have questions to answer. The Minister took the advice of economists and advisers but, knowing the Minister, I believe she makes her own decisions.
Eircom shareholders want to know what happened to a share that reached a peak of 4.80 and has now dipped below 3. Investment in shares diverts money away from the general consumer. It is flittered away and drives up inflation. Many people considered they had the security of a Government sell-off. They thought it was a safe bet given the publicity surrounding it, including  champagne receptions with high profile people. However, people were less than honest with the investors. In business it is important to be upfront with people and to give them the facts. The Government should have been more businesslike and should have said it would come in at a lower price. It was greedy and going for gold.
There was great hype about the millions of pounds that were received but people were stung. The sell off was little more than massive hype. People did not understand what they were getting into and little was done to explain the workings of the stock market to them. Those dealing in stocks and shares and those in business are familiar with flotations and the ups and downs of the market but many of those who bought Eircom shares were first time purchasers. We see this in the bill of sale for any purchase made. Little was done to highlight the negative aspects while the positive side was well publicised. We hear of the risks only in the aftermath of what has happened.
For some it was a win-win situation. The banks are making money and the already full coffers of the Government were swelled. An important fact is that the decision by KPN and Telia to sell their shares at the earliest possible date resulted in an overhang of 776 million shares on the market. The problem is one of over supply thereby depressing the price. The Government has a responsibility as it encouraged people to buy into Eircom. It may not mean much to a Member of this House to lose £4,000 or £5,000 but there are those to whom that is a considerable amount of money. Their confidence in investing in shares has been severely damaged and the Government has done the country an injustice in the way it handled this issue.
Mr. Neville: I compliment Deputy Yates for raising this important issue. Anyone who suggests that a decision by the Minister and the Government that has gone so wrong should not be challenged and discussed here is not being true to the democratic principles of the House. The Minister and the Government were irresponsible and negligent in not informing the public that KPN and Telia would not stay with the company if it failed to increase its shareholding above 35%. They now have a duty to those who purchased the shares to state why full information was not given to those who considered purchasing Telecom shares at the time of the flotation. The seriousness of the situation was not brought home to me until I heard the chief executive of Eircom, Mr. Alfie Kane, speaking on Morning Ireland. He stated that it was the view within Eircom's senior management that the share price was 30% above the prevailing Telecom value and that the Government had made the decision with that knowledge. The Government must answer the question as to why it hyped the price knowing that the shares were overvalued.
I often wondered why the advertisements continued to be broadcast on television weeks after  it was known that the sale of shares would be oversubscribed. I believe the hype was to promote the Government and the Minister, and had nothing to do with the issue involved. The Minister has made an excuse that her advisers informed the Government on the price, but where were these advisers from? Did they say: “There is an opportunity to make a killing; there are gullible people out there who will pay this price if the sales pitch is right“? Did they say the sales pitch should be made to people who have no experience of purchasing such shares? Did they advise selecting people from the register of electors, hyping the chance of making a fortune, and hoping that the lottery syndrome would apply? This was at least unfair and at worst a con job. It showed callous disregard for up to one million small investors, many of whom borrowed to purchase the shares. Where are these people today? The Government has put them in a position where they have made substantial losses by paying back borrowings on negative equity.
I fail to understand why this happened. At a time when an unprecedented level of finances are flowing into the Exchequer, the Government introduced this hidden tax measure disguised as an opportunity to realise financial gain. It was nothing less than sleight-of-hand taxation whereby people paid money believing they would gain. In fact, it was a net gain to the Exchequer on shares that are now 30% less than their sale price.
The propaganda stated that Telecom deserved a premium rating because it was the largest operator in the fastest growing economy in Europe, but the shares did not merit this premium. The Government must have been aware at the time that all the big players in Europe were off-loading shares in similar concerns in their own countries. While this was happening in Europe, the Irish public was being encouraged to buy Telecom shares and become investors for the first time. They were almost being guaranteed a profit. The Minister led the hype, ignoring the advice of the chief executive of Telecom, and launched the flotation at a suitable time. It is easy to compare what was done and the decision made by the investors as akin to the risk of backing horses, as the Minister has stated. However, the media hype, especially through television, left nobody who was considering an investment in any doubt other than that they would make substantial profits. They were told they were in for a killing, yet the small print quietly stated that “shares prices can fluctuate”.
Many of the ordinary investors involved – some of them elderly people of little means – invested their savings in the hope of improving their life circumstances in a small way. Others borrowed to invest, which was worse. As that great orator, Deputy Sheehan, said yesterday, “this is the greatest debacle of all time”. The Minister has not fully explained the reasons she made such a bad decision.
Mr. Lowry: Before coming to the substance of this motion, I would like to refer briefly to the first phase of the privatisation of Telecom Éireann, which was the strategic partnership agreement in 1996 in which I, as Minister for Transport, Energy and Communications, was directly involved. By the end of 1995, Telecom Éireann had made some progress in reducing its debt and in restructuring its tariffs. However, the company still had the fundamental problem that its cost base and general level of prices were much too high to sustain its viability in an increasingly open and competitive market.
At that time, I was particularly concerned that these inefficiencies were being passed on to their customers, which was damaging to the overall competitiveness of the economy. Because of these factors, we decided to begin the process of selecting a suitable strategic partner who would help to accelerate the critically important change process within Telecom Éireann and provide the company with access to the latest technology, new expertise and international markets.
After an exhaustive and detailed process, negotiations were completed in June 1996 on a strategic alliance between Telecom Éireann and a consortium made up KPN Telecom of Holland and Telia of Sweden. Under this arrangement KPN-Telia acquired 20% of the shares in Telecom Éireann for an initial downpayment of £183 million, with an option to buy a further 15% for £200 million after three years. This option was exercised in July 1999. In order to maximise the ultimate windfall to the taxpayer from this sale of shares, I insisted on the inclusion of a complex “claw-back” arrangement under which the actual price of the shares being sold to KPN-Telia would not be calculated until after the company was floated on the Stock Exchange. Therefore, the actual price to be paid by the new partners for their stake would be based on the value of Telecom Éireann at the time of its privatisation, rather than the book valuation in 1996. The ingenuity of this agreement was widely recognised by the financial markets, trade unions and IBEC at that time. When implemented, this strategic alliance brought immense benefits to Telecom Éireann itself and was instrumental in positioning the company for the advent of full competition and for privatisation.
At the same time as this was happening, I was subjected to vicious criticism by Deputy Séamus Brennan, who is now a Minister of State, and was then the Fianna Fáil spokesman on Transport, Energy and Communications. In his usual cynical, negative and ill-considered way, Deputy Brennan castigated me, both in the House and outside it, for what he believed was a bad deal. He described it as a “sell-out”, “shameful” and “a major financial scandal”. He availed of every opportunity to repeat these allegations and to maliciously imply that the shares were actually being sold to KPN-Telia for the downpayment alone.
I welcome this opportunity to set the record straight. The facts of that deal have since become  clear. The actual outcome of this agreement was a massive windfall payment to the State from KPN-Telia of £1.16 billion which was payable on 7 February this year. This sum was additional to the £383 million which had previously been paid. The total payment to the State, therefore, was more than £1.5 billion.
To borrow Deputy Brennan's term, the real scandal in relation to this matter occurred under the watch of the current Government. Its failure to provide all relevant information to prospective purchasers of shares last year has left almost half a million small investors wondering what went wrong. In my view, the clear impression was created that KPN would be long-term investors in Eircom and that Telia would probably have to sell its stake because of its planned merger with Telenor, which is a partner in Esat Digifone.
It was clear to me at the time of my involvement in negotiating with them, and this view is supported by many industry experts, that KPN would only remain as a long-term partner if it was ultimately able to acquire a controlling stake in the company. The conditions included in the Government's sale prospectus for Telecom, whereby KPN was prevented from increasing its shareholding, must have been discussed with KPN at the time. The question must be asked, therefore, whether KPN was satisfied with this condition or whether it indicated that it would precipitate its exit from Eircom. The answers to these questions must surely have been known at the time and should have been made public.
Observing the way in which the IPO was promoted, it is obvious that these issues were deliberately downplayed and understated. By imposing this condition, the Government effectively excluded KPN, probably the only major global telecommunications company which expressed an interest in acquiring Eircom, from taking control of the company. The involvement of a major player represents the best opportunity for small investors to achieve the profits they hoped for when they purchased their share.
The blame for the gross mishandling of this flotation has been passed around like snuff at a wake. The company management blame the Government and Ministers blame each other. During the hype, the glitz and the glamour of the launch, Minister O'Rourke was tripping over herself to take the credit and the glory. Now that the flotation has gone sour and angry shareholders are lining up for a target, the Minister and the Government have gone into hiding and are passing the buck back to the company.
Minister of State at the Department of Public Enterprise (Mr. Jacob): At the outset I wish to thank all colleagues for their contributions to the debate. I would like also to reassert that while the Minister for Public Enterprise and I are always happy to come into this House to debate issues and to share information on matters for which we have direct political responsibility, we feel a special responsibility to the shareholders in Eir com not to make statements which in any way distort investor perceptions of the company.
I wish to use this opportunity to reassert the basic case made at the outset of the debate on the Government side. First, there was no commitment that the shares of a floated company would never drop in price. The strict rules applying to international stock exchanges make this impossible. Careful attention was given to all information releases at all stages of the IPO process to ensure that the material was balanced and accurate.
Second, in the 11 months since its flotation, the Eircom share has traded at or above its flotation price on all but 39 out of 234 trading days. The Government cannot be held responsible for the evolution of the share price in the market some 11 months after flotation. This is particularly apt given the recent weakness in technology stocks on international markets.
Third, the offer documentation was scrupulous in setting out accurately the state of play with regard to the strategic partners in the company. This position was made clear in both the main prospectus and the mini-prospectus. This level of diligence and accuracy is a fundamental requirement of the stock exchanges which cleared the text of the prospectus.
Fourth, the offer documentation set out fairly the risks associated with investment in the Eircom stock. The Minister set out the relevant contents of the mini-prospectus in summary form yesterday evening in this House. Fifth, it has been made quite clear that the decision of KPN to sell its stake is that company's decision alone. KPN has already stated publicly that its decision to sell has come about as a result of its strategy to focus more on the wireless business and its need to fund this shift.
Sixth, the Government has stated the facts as they relate to the interface between the company and the process. The prospectus and the price range, which was set prior to the flotation, were agreed by both Government and the company. The final price of £3.07 was within this price range and just above the mid-point of the range. In summary, pricing of the shares in July 1999, as at any other time, involved balancing the need for a fair price for taxpayers and the need for a fair return for retail and institutional investors.
Criticism was expressed from certain quarters in the immediate aftermath of the flotation that the price of the Eircom shares was set too low by the Government. The Government could have chosen to float the company at a higher price. It chose not to do so. Deputies are fully aware that in the immediate aftermath of the flotation, the shares rose in price by 20% and that the share has traded well above flotation price most of the time since the flotation. In the first three months of this year, the share price was never below the issue price and reached a high of £3.78 on a number of occasions in that period, a premium of 23% of the flotation price.
The Government contends that this motion has  been put forward without regard to the interest of the shareholders in the company. The company advisers, cited by Deputy Yates as supporting a lower share price, also justified a valuation above the IPO price subsequent to the offer. In short, what we have here is an Opposition motion without the support of any credible evidence. It is a motion which instead exploits the present share weakness and, in particular, the position of Eircom shareholders. I commend the Government's amendment to the House.
Mr. Shatter: I wish to share my time with Deputies Crawford and Yates.
I congratulate Deputy Yates on tabling the motion that has been debated both yesterday evening and this evening in the House. The attitude of the Government, and the extraordinary arrogance shown by the Minister yesterday evening and the Minister of State this evening, epitomises the contempt with which Fianna Fáil in Government likes to treat this Parliament as a parliamentary assembly. Members of this House are entitled to hold the Government to account when it gets things badly wrong. We are particularly entitled to hold the Government to account when instead of protecting the citizens of this country it seeks to exploit them in a cynical and disreputable way. To suggest that Fine Gael, or any Deputy, is irresponsible for raising the manner in which the share price flotation of Eircom took place is a gross failure to understand what this House does and its entitlements.
The Minister said yesterday evening that no person in any country can make a commitment that the shares in a floated company will never drop in price. That is absolutely true. No one can make a commitment that the shares of any floated company will not drop in price. As someone who on occasion buys and sells shares, including Eircom shares, it does not cause me any great surprise when shares go up or when they go down. They often go up and down for the most irrational of reasons. That is not the issue. The issue is that Eircom was floated in the context of this State selling State assets, which are effectively owned by the citizens of this country, to raise funds for the Exchequer. The Government had a sacred duty to ensure that the price at which Eircom floated was one which it knew would reflect the true value of the company on the day of flotation.
We have heard the Minister for Finance, and indeed the Minister responsible for this debacle, using the simile of people gambling on the horses. Putting money on a nag that it might go past the winner's post in the Curragh, the Galway races or at Leopardstown is different to investing in what was a State asset with the assurance of Government that the price at which it is selling this asset truly reflects the value of what is on offer.
We now know that the Government has been misleadings us. We now know that, contrary to what has been stated, the chief executive of Eir com was of the view, on the day when the share price was being fixed, that the fixed price was excessive as the market and the value of the company stood at that time. We now know that there was a report from ABN AMRO which warned that the share price should not be fixed at the level at which it was fixed by the Government, and we know that the Government went ahead and fixed this price without prior agreement of those responsible in Eircom. That is a disgrace. The report from AMRO that the Minister is suppressing should be published. It is not good enough for her to say that she telephoned Eircom last night and asked it to make it available. There is a public obligation to publish this report. If the Government has nothing to fear from it, it should not be suppressed.
I want to refer to one example of the type of problems we have currently in the economy. The Taoiseach was quoted in Saturday's The Irish Times as saying that consumers should start questioning unjustified price rises more closely, as greedy traders raise prices simply because the economy is performing well. That was a warning from the Taoiseach. People who wish to rely on Government advice on the value of floated State assets should be careful of greedy Governments which want to exploit them because the economy is doing well.
Mr. Yates: Hear, hear.
Mr. Shatter: The behaviour of this Government is disgraceful. Thousands of pensioners throughout the country bought these shares in good faith and in the belief the Government put them on offer at a valid price. If the price was valid, no one could complain in this House that the price was now somewhat below the flotation price because of variations in stock markets. However, we know the chief executive of Eircom believed the price to be too high. We know the board of Eircom was not consulted about the price that was fixed. The Minister of State and the Minister constantly talk about consultation on the range within which the price might be fixed. There may have been consultation on that, but the fixing of the price did not result from consultation.
I do not believe any member of the public would ever again trust any member of the Government, be they Fianna Fáil or a Progressive Democrat, senior or junior Minister, enough to purchase anything from them. It was once said about an American politician that no one would buy a second-hand car from him. In the context of the Government's performance on this issue, I do not believe any member of the Government should ever be trusted by the public with the sale of a second-hand car or any State assets.
Mr. Crawford: I thank Deputy Yates for the opportunity to speak on this critical issue. I want to declare that I am a £1,000 shareholder in the company.
Some 500,000 shareholders are watching the  fall of Eircom shares with fear and trepidation. Millions of pounds were spent on promotions by the Minister to encourage people to take part in this first major sell off. The public was advised by the Minister to take this great opportunity and that they could talk about it in the pubs at night. No doubt, if they can afford to go to the pubs they are talking about it at present.
It is now clear from Mr. Alfie Kane's statement that it was known within Eircom that the Government's share price was 30% above the prevailing value. We all hope the price comes back up again for the sake of those who invested. Banks, credit unions and others did a major media blitz and offered special loans to investors. A person who bought £17,000 worth of shares now stands to lose £4,000. Many others, as a result of the publicity, withdrew their nest eggs which were earning low interest in bank accounts. They now find themselves with serious loans or capital losses, at a time when, as a result of increased inflation which is also due to the Government's mismanagement, they would, ironically, have benefited from higher interest rates if they had left their money in the bank.
The Minister said that being in Opposition carries responsibilities. I cannot help, standing as I am behind our spokesperson, Deputy Yates, remembering the sort of responsibility shown by the then Opposition when BSE hit this country. The responsibility it showed was nil. It said that Libya, Iran and Egypt could be opened up again. It has been in Government now for three years but we have yet to see the results.
The former chairman, Mr. Ron Bolger, was taken out by the same Minister. She replaced him with Mr. Brian Thompson, who had to resign because of a conflict of interests. The Minister further snubbed Mr. Bolger by ignoring him and his lifetime of public service by bringing in Mr. Ray MacSharry, who was chosen for political reasons – we have heard this week about jobs for the boys. Mr. Ron Bolger left his post as vice-chairman and resigned from the board. According to the media and many others, Mr. MacSharry had a long record of public service in this country and Europe. He was also a director of many companies and the chairman of Coillte. It is interesting that Coillte may be one of the victims of the Eircom difficulties. I understand it is no longer for sale. Mr. MacSharry was also a director of Galtee Deer Care. Many farmers in Cavan, Monaghan, Galway and elsewhere lost hundreds of thousands of pounds over that. There are efforts to bring some of those involved to court, so I will not dwell on it the matter.
I appreciate the Minister explained how she took advice from very expensive advisers. However, she did not always do that. She made the political decision and she deserves to take the rap for it.
Mr. Yates: I thank all those who spoke in the debate. The Minister's protestations when this debate was announced that it would cause a run  on the shares has proved to have been disingenuous because, from the time the motion was tabled, the shares have shown a modest recovery. I am sure the shareholders wish there was a debate on it every week.
I found it a little rich and somewhat ironic that the Minister in her speech last night accused me, Deputy Bruton, and the rest of the Opposition of ventilating “half-truths, innuendoes and mad-cap conspiracy theories”. She said in her speech:
I would like to return now to the land of mad-cap theories. Deputy Yates appears to believe the report compiled by merchant bankers, ABN AMRO, for the company was suppressed in some way.
The Minister described this as a mad-cap theory. Yet, on 1 December I wrote to Kevin Doyle, the freedom of information officer in the telecommunications division of her Department, to get a copy of the ABN AMRO report. I received a reply on 26 May that it could not be made available to me. I rang three times yesterday looking for it. The Minister rubbished me for a half-truth that this was suppressed, yet in the same speech last night she said the report will never be published because it is commercially sensitive data.
That report vindicates what Mr. Kane said last week. He also said it at the time of the IPO. It is the Minister who is engaging in half-truths and pretending it is not being suppressed, when she is part of the procedure that is stopping the report, of which she possesses a copy, being published.
The Minister went on to tell another very serious half-truth. My information is rock solid on this. She said that KPN said Telia had to get out of the company for regulatory reasons because of the merger with Telenor and the stake in Esat. The theory – which was confirmed by the former Minister, Deputy Lowry – was that KPN would take up the slack. However, KPN went further. When it was in negotiations in the first half of last year, it said it wanted to be in a position to buy out the entire company, to go beyond the 29.9% threshold.
The Minister let the cat out of the bag last night when she said “The only point I want to make at this stage is that there was little point in floating Eircom only to have an immediate takeover of that company in the aftermath of flotation”. Who might be interested in a takeover of the company? None other than KPN itself. When it was told it could not buy the company out, it said it was off.
It is the fact that KPN left and that 776 million shares are overhanging the market, rather than what I or Alfie Kane have said, that is driving the price of Eircom shares below their IPO sale level. There is a glut of shares. They are prepared to do a secondary offering at a 10% market discount and a further 5% institutional discount. The heart of the problem is that Alfie Kane let the cat out of the bag last week and that the full details of what happened with KPN were never told to the shareholders at that time.
 Almost every Fianna Fáil speaker used a quotation of mine where I said this was a sure bet and a good investment. I made those comments in April. The IPO was in July. When I heard the process was that one had to register and subscribe first and the price would be set afterwards, I told anyone who asked my opinion that that was a dubious practice and not to be recommended. Of course, it is of interest to the Minister's spin doctors to represent me as the one who was promoting the shares. However, the Minister was the one jetting to New York and the one with the balloons, skydivers and champagne, who was hyping this and who spent a budget of almost £20 million bamboozling the public on radio and television to buy these shares. Now that the flak is  hitting the fan, what does she do? She blames the Minister for Finance, Deputy McCreevy, and the Tánaiste, Deputy Harney, for setting the price. She wanted a much lower price. Last year she was like the school mistress giving the pupils a free day but this year she is putting up her hand when there is bad news and saying “Not me, sir, it was them.”
The truth is that permanent damage has been done to the credibility of future privatisation and IPOs because the trust of the people in the Government – that it would be an honest broker and would not make a quick buck – has been betrayed by the Minister, Deputy O'Rourke, and this Government, and they will never be caught again, much to the detriment of this country.
Browne, John (Wexford).
de Valera, Síle.
Ó Cuív, Éamon.
Wright, G. V.
Browne, John (Carlow-Kilkenny).
Fitzgerald, Frances. 
| Noonan, Michael.
Tellers: Tá, Deputies S. Brennan and Power, Níl, Deputies Sheehan and Stagg.
Question declared carried.
Question, “That the motion, as amended, be agreed to,” put and declared carried.
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