Anyone on a drive around the Blessington area straddling counties Wicklow, Dublin and Kildare these days can expect to meet crews hanging miles of fibre optic cables from poles, “blowing” them into underground ducts with compressed air and plugging them into the boxes and cabinets that will soon bridge the gap between rural Ireland and the world of fast, reliable internet access.

“When I see them around, I know we’re almost there,” says TJ Malone, chief executive of National Broadband Ireland Deployment. His side of the company is tasked with building out a high-speed broadband network capable of reaching every address in the country deemed not commercially viable by market operators. He says the hardest part of the work took part earlier – surveying every single pole, duct and obstacle in the way, designing a path through them and getting permission from myriad state bodies.

Customers in the Blessington area will be able to order a broadband service on this new network through their usual retailer between March and May this year. It is an ideal showcase for the project, just down the road from the head office of National Broadband Ireland (NBI), the parent company of Malone’s deployment unit and November 2019 winner of the state-subsidised National Broadband Plan (NBP) contract.

The company has taken a regular stream of politicians and journalists on this tour over the winter – since 15 Irish companies forming the corporate structure of NBI, and linked to further related entities in Luxembourg and in the US, started to publish accounts in late November for 2020, their first year in operation.

The filings raised many questions covered by The Currency, the Business Post and in multiple exchanges between NBI, the Department of Communications and the Oireachtas ever since. Who exactly are the shareholders that own and fund the company? How committed are they? How do they – and the taxpayer paying for the infrastructure at a maximum cost of €2.97 billion including Vat – stand to benefit if the project is successful? 

NBI provided answers during a visit by The Currency stretching to over six hours this week with full access to its senior management team, the lead civil servant overseeing its contract for the state, its operations centre and contractor crews. 

Who exactly is NBI?

There were many changes in the group of investors led by Irish-American businessman David McCourt – now NBI’s chairman – who ultimately won the NBP contract after a long-winded procurement process between 2015 and 2019. McCourt’s own vehicle, Granahan McCourt, and Tetrad, the family office of his long-time US-based business partner, the late Walter Scott, were always there. At the time the contract was signed, US investment firm Oak Hill Advisors (OHA) was revealed as a major direct investor in NBI. Further detail has been trickling down since, but the company’s ownership structure was never fully disclosed.

For the first time, NBI has now provided The Currency with what chief executive Peter Hendrick said was its full list of ultimate shareholders. 

According to NBI’s chief legal officer and company secretary Jenny Fisher, investment funds managed by Oak Hill Advisors remain the largest shareholder in the business’s central holding company, Granahan McCourt Dublin Ltd, with a 49 per cent stake.

She confirmed that, among other investors aggregated through a vehicle called Granahan McCourt Fund Ltd, another US investment firm, Twin Point Capital, holds a 25 per cent ultimate shareholding. The Scott family’s Tetrad Corporation has “just under 13 per cent” and Granahan McCourt “just under 6 per cent”. 

This leaves seven per cent shared across three ultimate minority shareholders: Hendrick himself; Canadian-based Bruno Ducharme; and US-based Brian Thompson. Hendrick described Ducharme as “a long-term telecoms guy who has done fixed and mobile across Canada and Europe”. 

Thompson was the missing shareholder until now. He has invested through a US-registered company called UTI Ireland, LLC, recently identified by the Business Post in NBI’s shareholding structure. The company was the focus of questions at a hearing of NBI executives before the Oireachtas communications committee last month, but the company opposed a confidentiality agreement with the shareholder, which has now just been lifted.

“Brian Thompson’s background is that he’s a telecom veteran and a partner of David [McCourt]’s over the years,” said Hendrick. “He’s the founder and shareholder or chairman of GTT, which is quite a sizable international telecoms company. In the mid-1990s, he was somebody who was pushing hard for wholesale, open-access infrastructure across the US and Europe and very much believes that wholesale, open access has always been this driver to create real competition.”

This model means that networks, such as that now being built by NBI, can be used by any retail operators to provide services to customers. On his LinkedIn page, Thompson discloses that his private equity firm Universal Telecommunications, Inc (UTI) previously “played a key role in the formation and/or management” of companies including Enet in Ireland.

Between 2013 and 2017, McCourt and his partners owned Enet, a Limerick company set up to operate the state-owned Metropolitan Area Networks (MANs). It provides such wholesale, open-access fibre connectivity inside Ireland’s urban areas. Other companies can plug into MANs to serve individual neighbourhoods and customers. Enet then expanded to provide other types of similar wholesale fibre infrastucture.

The past history of McCourt, Tetrad, OHA, and Thompson among Enet’s investors – and Hendrick in its senior management team – helps understand two other questions raised by The Currency in December after the publication of NBI’s 2020 accounts:

• Why, if OHA holds a non-controlling 49 per cent stake in NBI as the company has always maintained, did its Luxembourg vehicle report initially investing €53.6 million representing a majority of the €100 million shareholders provided to NBI that year?
• What was the role of Telecom Infra Mgmt Ltd, a US holding company with an intermediary 5 per cent holding in the NBI group and no financial information available?

When asked these questions at the time, OHA did not reply. NBI simply said that “Oak Hill holds less than 50 per cent interest in NBI”. A €4.6 million subsequent “transfer” from OHA’s investment in NBI closely matched the 5 per cent interest held by Telecom Infra Mgmt, with no other entity identifiable for this transfer in company filings. The Currency then concluded that OHA and Telecom Infra Mgmt must have been linked, which would have pushed OHA’s interest in NBI beyond its formal 49 per cent shareholding. 

Only after this information was published did the Department of Communications contact The Currency to state that “Telecom Infra Mgmt LLC is not an investment vehicle for OHA. It is an entity, which is jointly owned by Tetrad Corporation and Granahan McCourt Capital LLC.” There was still no explanation for the figures above.

So, what exactly happened?

Hendrick explained that between the NBP contract’s signature in November 2019 and its effective date in January 2020, NBI was not yet eligible to permanent funding under OHA’s investment criteria (except for a symbolic €1 million early share purchase to establish the structure). “We needed a bridging loan from shareholders,” he said. “The bridging loan was literally just for mobilisation activity, so we could start started spending money on surveyors, designers, engaging with leasing this property [NBI’s head office in Dublin’s Citywest], establishment of the NOC [National Operations Centre], the lab. It was to get investment going, at risk, before the contract became effective.”

Fisher added that OHA’s share of this temporary funding was €4.6 million. On the contract effective date in January 2020, OHA then contributed its €48 million share of longer-term funding, pushing its total investment to €53.6 million – but immediately received repayment of its €4.6 million bridging loan to NBI, keeping its interest at 49 per cent through the process.

If not a vehicle for OHA, what is then the purpose of Telecom Infra Mgmt? 

“That was a vehicle that was an investor in Enet previously,” said Hendrick. “What David [McCourt] and Walter [Scott] agreed was that, obviously, they were no longer a shareholder in Enet but the funds that came out of the Enet investment were sitting in Telecom Infra. A lot of those funds never left Ireland and, effectively, they agreed that they would reinvest them back into NBI. There was nothing more to it than that.”

This explanation is to be placed in the context of McCourt and his partners’ acquisition of Enet in 2013 and their exit within five years. The deal’s structure was similar to NBI’s today. OHA took a 48 per cent shareholding in Enet’s holding company, McCourt and Tetrad jointly held 22 per cent and minority partners the rest. Its sale was triggered by OHA, the largest in a group of investors to sell out in 2017. The Irish Infrastructure Fund (IIF), an investment fund managed by AMP Capital and Irish Life with backing from the state, bought out this first group and became a majority owner of Enet.

In late 2018, IIF finally acquired McCourt and Tetrad’s remaining 22 per cent stake in Enet. On that occasion, Granahan McCourt Dublin (Ireland) Ltd, the vehicle used to hold Mc Court and Tetrad’s 22 per cent stake in Enet, reported selling it for €30.5 million. This is the source of the funds Hendrick says were left in Telecom Infra Mgmt, which then made an investment of around €5 million in NBI in 2020.

Granahan McCourt Dublin (Ireland) Ltd was not only holding McCourt and Tetrad’s investment in Enet, it was also the preferred bidder selected by the Government to obtain the NBP contract in May 2019. Thanks to the latest information from NBI, we can now piece together the evolution of the winning bidder since 2015.

In the early stages of the procurement process, its bid for the NBP contract was publicly fronted by Enet and gradually added co-investors with public-private partnership (PPP) and infrastructure experience. When IIF acquired Enet between 2017 and 2018, however, the new owner was interested only in its urban networks and associated business – not in the tender to roll-out subsidised rural broadband.

McCourt and Tetrad kept their NBP bid alive separately, lodging it in their existing Irish vehicle Granahan McCourt Dublin (Ireland) Ltd. As explained by Hendrick above, they kept the proceeds of their Enet divestment available for this purpose in entities including Telecom Infra Mgmt. At that point, however, two major co-investors pulled out: SSE and John Laing.

These twists and turns left NBI, the company that signed the NBP contract in November 2019, owned by the current shareholders listed at the start of this article. Having sold out of Enet two years earlier, OHA came back as a shareholder in the final structure established in the weeks preceding the signing. This raised eyebrows, including in Dáil debates at the time, as OHA’s name had not previously appeared among participants in the bid.

“Oak Hill were never gone anywhere. They were always there. They were an investor in Enet. So it’s not like they came and they went, or they just turned up,” Hendrick said. “They’ve always been there with Granahan McCourt as a party to come in as an equity partner. But they only commit funds once there’s a contract.” He added this was a requirement with firms channelling investment from pension funds in general.

“The hardest part is out of the way – albeit the numbers aren’t on the board yet.”

Peter Hendrick

Another feature of a hedge fund manager like OHA, as illustrated by its exit from Enet after four years, is that it invests over a limited time horizon. In a column in the Irish Independent in November, McCourt spelled out the challenge this poses for him in finding replacement partners willing to stay for the long haul – the NBP contract represents a commitment of at least 25 years. “I wasn’t able to accomplish this at Enet, an Irish company I owned with Walter [Scott], because I waited too long to put long-term capital in place,” McCourt admitted.

Now he is facing the same challenge at NBI. As revealed by The Currency in December, Granahan McCourt has appointed global investment bank PJT “to establish a long-term capital structure that recognises the maturity of the project”. 

“PJT are working on it at the moment,” Hendrick said. “We’re not directly involved in it, PJT is running it as a separate team. I would expect it to be sometime before the end of this year, I’d say Q3, Q4.”

Hendrick told the Oireachtas communications committee that McCourt was not looking to exit. Based on OHA’s typical investment horizon over a few years, The Currency asked him whether the largest shareholder was now looking to exit and he confirmed: “Correct.” Asked the same question about Twin Point Capital, also a US fund manager, he added: “Twin Point is somewhat different in that it’s a very focused telecoms investment vehicle. They stay longer in activities. Time will tell, I don’t know today.”

Hendrick said the reason to replace OHA with long-term investors now was the change in NBI’s risk profile. “They have specific dedicated funds for different stages of businesses. NBI was a greenfield project with risk,” he said. He contrasted this by elaborating on the current state of the business:

“When we look at the project where we’re at today, obviously we’re active across all 26 counties. The unquantifiable risks that we would have looked at a number of years ago and the challenge for many people, in terms of taking on the NBP project, are all measurable now. 

“We understand what the take up is going to look like. We understand the demand for broadband. We understand the scale, in terms of whether it’s replacing poles, repairing ducts, installing ducts. We understand the scale of what’s required to deliver the project. We have our framework in place with all 33 local authorities on the poling piece. We’ve got four contractors on board, we have another two coming on board. We’ve 50 retailers on board, a lot of them have gone through the onboarding process. 

“There’s always risks in projects, even when you’re up and you’re in steady state. But actually, the hardest part is out of the way – albeit the numbers aren’t on the board yet.”

Regarding demand for high-speed broadband, Hendrick said customers were previously slow to upgrade when offered incremental service improvements, but the increased reliance on online services during the pandemic and the growing number of devices in each home had led them and retailers to look for “a significant step change in terms of speed and technology”.

Another factor improving the outlook for demand on NBI’s network has been the publication last year of Eir’s white paper on the future switch-off of legacy copper landlines. The document notes that, as long as this existing network remains in service, “NBI foresee it will take between five to seven years to reach all 537,596 premises in the intervention area, but 15 years to fully migrate services to its network”.

That’s because some people in those rural areas covered by the NBP contract may not see an immediate need to change their slower existing broadband plan, or may not use broadband at all for some time yet.

But Eir has now proposed to switch off copper landlines shortly after they are bypassed with NBI’s fibre. Under the white paper, once 95 per cent of customers connected to an exchange are capable of ordering fibre, Eir would ensure the remaining 5 per cent are upgraded within three years and then give customers up to 18 months to switch to the new network before switching off the old one.

Eir’s copper switch-off plan has yet to be approved by regulators but, if implemented, it would offer NBI a boost in the certainty of uptake for its service above its initial long-term estimate of 85 per cent. “The proposals in this white paper will significantly fast-track this to the benefit of NBI,” Eir stated. “With increased clarity on copper switch-off, NBI will be in a better position to reap the benefits of efficient and timely deployment, ultimately ensuring an efficient use of taxpayers’ money.” Eir’s own interest in this is to stop paying for the maintenance of an ageing, redundant copper network.

This is crucial for NBI’s business model because customer demand for access to its network is the main risk outside its control. “If I go back and look at 2018, 2019, if we were to look at the take-up over the life of the network, we would have assumed copper switch-off over a longer period of time,” said Hendrick. 

Asked whether the combination of Eir’s copper switch-off proposal and increased demand for broadband during the pandemic had made NBI less risky and more valuable than before Covid-19, he added: “Time will tell but I would say it’s a more secure investment than what it was.”

This strengthens OHA’s hand in selling out at a premium. By paying this premium, any potential replacement investor would acquire a lower but more certain return in the long term – though Hendrick pointed out that profitability was capped under the contract: “Even if you say this is now de-risked and it’s really great investment, there’s still a ceiling.”

In any case, a transfer of shares to new investors will require approval from the minister for communications. And unless they find a buyer, OHA contractually cannot exit, said both Hendrick and Fergal Mulligan, NBP programme director at the Department of Communications. “From our perspective, Oak Hill doesn’t really matter, they have to stay for 25 years. That’s the way because they’re guaranteed,” Mulligan told The Currency: “We have letters of guarantee from Oak Hill, Tetrad – all of them.”

Equity, debt and shareholders’ loans

In its annual filing for 2020 published last November, Metallah Ltd, the company consolidating NBI’s accounts, reported that only 2 per cent of the €100 million investment by its shareholders in its first year was invested as equity through share purchases. The other 98 per cent came in as loans “repayable as follows: Between 2-5 years”, i.e. before NBI’s network is due to be completed.

A note added: “Loans payable to the Group’s shareholders, are unsecured, repayable ‘on demand’ from 9 January 2024 and bear interest at 12 per cent p.a.”. The accounts showed that this 12 per cent interest was compounded, with the €11.8 million accrued in the first year rolled up into NBI’s debt to its shareholders rather than being paid out to them. 

There was no further information provided on the conditions of these shareholders’ loans in company filings, nor when The Currency asked NBI and government officials how the loans described in the accounts complied with earlier statements to the Oireachtas that NBI’s shareholders would commit over €200 million in equity. A spokesperson for NBI simply replied at the time: “Shareholder loans are a very typical structure for shareholders to invest their capital in a project of this nature.”

For two months, we remained in the dark as Minister for State for Public Procurement and eGovernment Ossian Smyth repeatedly asserted before the Oireachtas that NBI’s shareholders’ loans qualified as equity without providing an explanation or evidence. This was in contradiction with the wording used by intermediary companies set up by shareholders to arrange this funding – their filings used the word “equity” only in cases where shareholders contributed to a company’s share capital, but not for the “loans” advanced to NBI.

Only in late January did Smyth begin to lift a corner of the veil on this conundrum, when he told the Dáil: “In fact, this loan is only repayable when half the network has been delivered, in other words half the houses have been connected; it’s only repayable after 2024; and it’s only repayable if NBI is in profit.” Smyth added: “When a shareholder loan is tied to the performance of a company, its characteristics are more like a shareholding and that’s why it is sometimes called a participating loan.”

In this, he is correct and, unlike Metallah, many companies using such participating loan arrangements clearly report it in their annual accounts.

Although the exact terms and conditions to release investment agreed between NBI, its shareholders and the Department of Communications remain secret, both sides in the NBP contract have now provided additional information in answer to The Currency’s questions this week. Hendrick said:

“The shareholder loan has no term on it. It doesn’t have a ‘It must be repaid by’. It’s put in on the same basis of risk as as shareholder equity. There is a restriction in the contract in terms of us having 50 per cent of the network deployed before we can start to repay any of those loans. By the way, whether the contracts says it or not, it’s more about, actually, is there sufficient cash flow? So what’s really critical here for us is to ensure that we’re getting a network built, we’re getting customers on board, because there is no shareholder return without revenue.”

Although Hendrick added that “the repayment profile that we’ve mapped into our financial model would see us starting to repay those loans in 2024,” he said there were no covenants such as those typical of bank debt that would allow a shareholder to trigger a default event and call in their loan.

Asked why, if similar to equity, this loan format was chosen, Hendrick said this was “the well-trodden path in terms of structure that everybody understands” for similar infrastructure PPP projects internationally.

Mulligan added from the state’s perspective: “We fully reviewed that prior contract award. Arthur Cox were representing NBI and Mason Hayes were representing us.” According to him, all experts consulted in the process said: “This is standard stuff. This is what we do as lawyers for all the transactions across PPPs.”

While extracting profit-participating debt interest is a popular tax optimisation technique for investors using structures straddling Ireland and Luxembourg, as is the case for OHA’s shareholding in NBI, Hendrick said this gave no advantage to other investors in the company lending from the US because they had to pay tax on interest declared in their favour every year, whether it was paid out to them or not.

This leaves the question of the nominal 12 per cent interest rate reported by NBI on its shareholder loans. Asked by The Currency how this was arrived at, Hendrick said: “The number was simpIy a benchmark based on risk. There’s so much experience in terms of what those returns are expected to be.”

Mulligan added that the Department of Communications had done its own assessment of a reasonable rate of return to agree with NBI in the contract, especially as it was by then the single bidder for the NBP. He said the review used data from PPP broadband projects overseas and experience of its consultants working on similar deals. 

Mulligan said this had to be higher than the rate of return set by the regulator for the copper network, currently at 8.14 per cent, because the risk associated with constructing a new network and getting customers to sign up for the service is higher with a new fibre project.

He added that European policy tended to avoid publishing maximum return rates for such projects because that was a disincentive to private investors. “That’s the way these models work in telecoms,” Mulligan said. “At the very outset, everybody’s nervous to see what will construction look like, what will demand look like. That’s why regulators pulled back the brakes on regulation to say: Okay, the first thing is we need investment. We need the network to be built, then we’ll look at how we regulate it.”

This all boils down to a situation where he said the state agreed a contractual target return rate with NBI, in excess of which 60 per cent of profits are returned to the Minister for Communications. Asked whether this was 12 per cent, Mulligan said: “No, that’s only a rate the investors have agreed on.” He added: “The target is in their business model and that’s what is confidential. There are different targets set for different periods in 25 years.”

Hendrick said NBI’s return would be measured every five years, with a first reference point after 10 years. Despite the confidentiality around the exact target rate in the contract, he also told the Oireachtas public accounts committee last week:

“If we de-risk the programme and NBI is successful on delivering on Government policy, and we keep the cost down, deliver value for money and the return is 12 per cent or greater to the shareholders, there is a clawback for the minister where the minister shares in that gain.”

This is just one of a series of contractual arrangements to balance risk and reward between NBI, its shareholders and the state. Most remain secret as large parts of the NBP contract were redacted before publication. Among the public information, we know a cap sets the maximum subsidy for the network’s construction at €2.1 billion excluding VAT, with an additional €500 million available for “contingencies”. These include up to €100 million to compensate NBI in cases where encroachment by commercial operators into its intervention area cause a demonstrable loss of revenue. Other allowable contingencies include unforeseen inflation. 

Mulligan further detailed the three types of state clawback built into the contract:

• 80 per cent of build costs are subject to a 100 per cent clawback if they are underspent. Mulligan gave the example of a permitted €50 million bill to purchase fibre that ends up costing only €30 million – in this case, the state pays NBI €30 million only. Fisher added: “We have an ongoing obligation to secure value for money, which obviously features through our subcontracting processes, etc. In practice, what that means is we’re running mini-competitions all the time.”
  Mulligan said the Department collected all data from the procurement of subcontractors to check that NBI selected the best bidders and kept a quarterly tally of savings that will be clawed back at the end of the network’s deployment phase.
• The second clawback targets profitability in association with the target return rate described above. It occurs at years 10, 15, 20 and 25. The Exchequer will claw back 60 per cent of profits above the contractual rate at each of these “checkpoints”.
• Finally, Mulligan said NBI would be independently valued at the end of the 25-year contract and the state would get 40 per cent of that value. The valuation will be carried out two years before the end of the contract, giving NBI one year to make any corresponding payments in its final year. 

Mulligan also detailed NBI’s exit conditions at the end of the NBP contract: 

“At year 25, there’s a review to say: Is it profitable as well as paying those clawbacks? If it is, then they have already committed to complying with contractual conditions for a further 10 years, so the contract only actually finishes in year 35.

“If in year 20 or year 25, NBI says: ‘I can’t do the job for the subsidy or the revenue that I’m getting and I need more money from the state,’ the state has the option to either step in and step out, because the problem could be solved; or to terminate the contract and take over either the assets or the business.”

Oversight of the contract also includes verification of permitted expenditure under the €2 billion-plus subsidy, which covers network construction costs only. Hendrick said each supplier’s invoice was shared with the Department of Communications through a secured portal for clearance, and could be claimed only when contractual milestones agreed in the NBP contract were subsequently met. 

Mulligan added that ten to 12 accountants and ten to 20 engineers were allocated to review invoices and ensure the amounts claimed were eligible. 

They insisted that other NBI costs, such as management fees and the €32.7 million reimbursement of pre-contract bid preparation costs to McCourt and his partners, were not subsidised.

*****

Facing a vast open-plan floor at NBI’s Citywest office, a wall of flat screens displays national maps of wind strengths, power outages and connectivity locations, as well as a constant stream of alerts and updates from the network. Behind this wall, a “lab” is available to technicians testing equipment for the retail service providers that are beginning to sell access to its network (NBI is restricted to the wholesale business).

NBI Technical director Pat O’Toole, a four-decade Eircom veteran, is a fierce advocate of the choice to bring fibre to the door of every premises in rural Ireland under the NBP. Although the contract allows alternative technologies, such as wireless, in a small number of cases where fibre could not reasonably be deployed, O’Toole said he had not yet identified any.

According to him, this all comes down to the “future-proof” design of NBI’s network, especially the choice of an advanced so-called “passive” optical network all the way to each customer’s premises. This means all the “active” electronic equipment determining the network’s capacity and speed is in a smaller number of central locations and future upgrades can be carried out from there, with little or no work required down the line. The objective is to meet growing expectations over the 25-year duration of the contract at a minimum cost.

This is also an answer to critics who say that alternative technologies would work out cheaper than fibre. The minimum download speed for plans offered through NBI’s network is 500Mbps (or 0.5Gbps). Elon Musk’s Starlink, often cited as a possible alternative in remote areas, advertises download speeds between 150 and 500Mbps. O’Toole said NBI’s network as it is being built was capable of 10Gbps speed (though retailers would not necessarily offer this in current plans), and a minor upgrade requiring no technicians’ visits to customers’ premises could take this to 40Gbps. 

According to figures to February 4 shared with The Currency, NBI had supporting infrastructure such as poles and ducts under construction to just under 120,000 premises, and fibre being rolled out to another 62,313. Some 34,454 were “passed”, which means fibre was ready to be connected outside their property; and 8,796 customers had ordered a connection, of which 6,573 were connected. 

NBI Deployment’s chief Malone said that while pre-construction surveying and design was initially behind schedule, it was now ahead by around 10 per cent. Construction is where NBI needs to catch up, having missed its target to pass 60,000 premises by the end of 2021, which itself was revised down by nearly half in agreement with the Department of Communications in light of Covid-19 delays. Both sides are due to agree a revised timetable next month. Malone was confident 40 per cent of premises would be under construction by the end of this year.

Once it starts spending on construction, NBI’s own interest is to achieve fast completion as it stands to receive an average €2,000 subsidy for each premises passed and another €1,000 for each effective connection. There were 537,000 homes and businesses in its intervention area when the contract was signed but, as the population grows, this has now reached 554,000 and Mulligan expects 600,000 to 620,000 addresses to be covered by the end of the contract.

The project’s economics had to be redefined mid-way through the procurement process in 2017, when Eir announced it would cover 300,000 more rural addresses with its commercial fibre instead of leaving them for the state-subsidised NBP to pick up as previously expected. This carve-out is now complete. 

Showing a map of the Blessington area visited, Mulligan picked a road where this additional Eir deployment had made fibre available commercially to all houses immediately along the way, turning them blue on the government’s NBP intervention map. 

“NBI cannot connect anyone in the blue area,” Mulligan said, with state-aid rules reserving the subsidised NBP contract for under-served amber areas. Yet NBI must still build lines along those premises without collecting any revenue from them in order to reach others further away. “Had Eir not done this, NBI’s revenue would be through the roof. That had a pretty negative impact on the cost of the project,” Mulligan said. “There’s nothing wrong with what Eir did. It is its prerogative as a commercial operator to pick up commercial customers,” he added.

As NBI engineers met by The Currency on the roads of Co Wicklow designed their way around Eir’s existing infrastructure, they say they hit unexpected difficulties, from lost records to blocked ducts. After a difficult start, Malone said collaboration with Eir was improving on use of its infrastructure. After all, NBI is set to pay the incumbent operator €900 million to lease its poles and ducts over 25 years. 

What will be the value of NBI?

All these factors play into the value of NBI as a business. Unprompted by The Currency, Mulligan defended the government’s choice not to own the physical assets now being deployed. He said the equipment placed in exchanges had to be replaced every 10 or 15 years, while new poles had a lifespan of 40 years and fibre cable 40 to 50 years, leaving little residual value in the network after 25 years.

The NBP contract lets the government pay to place those assets in areas where the market would not have gone, while NBI carries the risk of generating business out of them. “We’re only funding the upfront cost. After that, they’re on their own,” Mulligan said. 

Yet Malone and O’Toole also showed The Currency the result of incredibly detailed work surveying every pole and manhole in NBI’s intervention area covering 96 per cent of the country’s land mass, collecting the information in a database allowing its engineers to click on a map and instantly see the latest photo of a pole or check when it was last inspected. They have been designing a nationwide rural broadband network based on this information, along with monitoring tools to keep track of its roll-out and future maintenance.

Surely these intangible assets will carry value into the future, judging by the pain NBI has had to endure not having access to equivalent systems covering Eir’s existing network? Mulligan did not appear to have factored this in, but said that if it emerged as an asset at the end of the contract, the state would be entitled to 40 per cent of its value under the contract’s final valuation clawback.