ESAT Digifone accused the Office of Public Works of trying to "blackmail" it during negotiations in 1997 over the telecom company's efforts to site its masts on Garda stations.
Letters seen by The Irish Times show that the OPW was irritated by a decision of senior Garda officers to agree to the deal in principle with the company in October 1996.
Even though it has occupied most of them since the foundation of the State, the Garda Siochana does not own many of its stations. Instead, the OPW or the Minister for Finance holds the title.
A "serious confrontation" erupted between Esat and the OPW during a meeting on February 20th, 1997, after the OPW demanded £10,000 a year for each mast, subject to annual rent reviews.
In a letter the following day to the Department of Finance, a senior official in the OPW's property management services wrote: "Esat Digifone objected fundamentally to every aspect of that proposal.
"They claimed it was a complete `change of the goalposts' from the understanding they had reached with the Garda authorities, i.e. that the rent would be determined by an independent person and they would open their books to this person.
"They indicated that they were (a) being pressed by the Department of Transport, Energy and Communications to commence service and (b) being fined by the Department for failing to do so.
"They accused the State of blackmail saying that while one Department was levying a fine on them, we were seeking a totally unrealistic payment from them knowing and taking unfair advantage of their difficulties," the OPW official wrote.
The Garda deal was vitally important to the fledgling mobile company because it could install equipment at stations already equipped with radio masts without having to seek planning permission.
By January 1998, Esat Digifone had 102 masts operational and another 25 installed at the 200 Garda sites exempted from planning laws. In contrast, it had not got even one mast operational at the other 200 sites which required planning approval. Senior Garda management strongly backed the deal because it got £7 million worth of free telecoms equipment, which allowed it to upgrade the Garda's own radio communications system. Under the terms of the deal, the State is allowed to rent out the sites to other telecom operators, but this has not yet happened. Indeed, the OPW believed at one point that such "double use" could be difficult to operate in practice.
During the February 1997 meeting, Esat Digifone executives threatened to "walk away" from the deal. "When some of the heat of the debate had subsided, Esat inquired if we had any objection in principle to independent valuation," the OPW official wrote.
However, the two sides are no closer to agreeing a price for the full list of sites. Last year, Esat owed £1,434,769 in rent on 48 masts. However, the Garda owed it nearly £1 million for calls made on Esat-supplied telephones. Eventually, the mobile company paid £501,029.
In addition, the company paid £800,000 on account for the other masts on which agreement has not yet been reached. The arbitrator, Mr Barry Smyth of De Vere White & Smyth, hopes to hold a hearing within months, it is understood.
However, industry sources say that the OPW is finding it difficult to put a price on the value of the masts because Esat is refusing to open its accounts on grounds of confidentiality.
