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Eircom pulls plug on Smart customers

Dispute over unpaid bills

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Smart Telecom suspended trading on the AIM on Tuesday in order to protect its falling share price after infrastructure owner Eircom disconnected around 45,000 of its customers.

It's feared that an additional 17,000 Smart Telecom customers could be left without any broadband or phone services - including emergency calls - as Eircom begins the next stage of disconnecting Smart customers from its network because of debts owed to the incumbent.

On Tuesday morning Eircom and Smart held emergency talks with communications regulator ComReg to hammer out an agreement on how Smart customers could be reconnected.

An Eircom spokesman told ENN that means to reconnect Smart's customers were discussed with the regulator, as well as a strategy to transfer Smart customers to a provider of choice. The two companies are expected to release a joint statement later today.

Smart is understood to have a total net liability to Eircom of around €4m. This is made up of €1.7m in arrears and a €2m security bond.

Smart has denied any customers will be unable to access emergency services while disconnected. Eircom claims that ComReg was informed about its plans to withdraw wholesale line services several weeks ago because Smart had been in arrears for some time. An estimated 67,000 Smart customers will be affected overall, including around 100 corporate broadband accounts.

"Eircom's decision to cut off Smart Telecom customers without warning shows an arrogant disregard for consumers," said Brian O'Donohoe, managing director of broadband provider Imagine, whic has set up a dedicated emergency line to reconnect Smart customers.

Widespread condemnation of the situation has been coming from all angles on Tuesday. The Irish Exporters Association has criticised Eircom's move to cut services "with no advance warning to customers" and claims the move will have a detrimental effect on businesses which rely on Smart's voice and broadband services to trade internationally.

"Business generally, but exporters in particular, are dependent on broadband services... to enable them to meet the ever increasing data information demands of overseas customers. It is critical that the necessary steps are taken to ensure that exporters are not left without a broadband service, while this issue is being sorted out," said IEA chief executive John Whelan in a statement.

The IEA has also called on Communications Minister Noel Dempsey to ensure a continuity of service to Smart's business customers, and speaking on behalf of Smart customers Minister Dempsey has called on Eircom to reconnect the lines.

Labour Party communications spokesman Tommy Broughan has also criticised Eircom's decision to turn off Smart accounts "at the flick of a switch" and said the Minister and ComReg had questions to answer for allowing this situation to occur. "What type of market facilitates such atrocious levels of consumer protection that facilitates such behavior?" Broughan said.

Head of Research at Dolmen Security, Stuart Draper, believes there is a political will and market expectation that Smart will pull itself out of its current crisis and pursue a "viable business model" concentrating on residential and corporate broadband after shedding its other voice businesses.

Draper said there is a perception in the markets that Eircom has acted against Smart less in search of its EUR1.7 million debt, but more as a monopoly service provider acting out of commercial self-interest against a competitor.

Draper expects Smart's main backer - Kingspan director Brendan Murtagh, who has been reportedly subsidising Smart with €3m\per month recently to keep it running -- to refinance the struggling telco.

"I think there is real support from the major shareholders who have deep pockets," he said.

NCB Stockbrokers, which were tasked with a recent review of Smart's operations, had contacted Eircom's retail unit to assess interest in buying Smart's wholesale line rental customers,

Copyright © 2006, ENN

but Eircom told ENN it said "no thank you".

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