The High Court 

Meridian Communications and Others v Eircell Limited

1999/5306 P 

20 July 1999 

CARROLL J: 

Meridian Communications Limited (Meridian) and its subsidiary Cellular Three Communications Limited have applied for an interlocutory injunction to require the Defendant Eircell to continue to supply air time at a volume discount after its current volume discount agreement (VDA) runs out, and also to observe its current agreement. Eircell has no contract with Cellular Three. Meridian negotiated a VDA with Eircell in 1997. 

The standard VDA in clause 4(i) and (ii) restricted the discount to the subscriber and its employees. At that stage Meridian operated, or intended to operate, a mobile phone rental fleet which, of course, would not be used by its employees. Eircell agreed to the deletion of clause 4. In November 1998 Meridian negotiated a renewal of the contract for 12 months. 

There is a conflict of evidence on whether Meridian informed Eircell that it intended to expand into a different market, that is, passing on its discount to customers as well as giving advice on the most economic way to utilise its mobile phones. If these customers were already direct customers of Eircell but not enjoying the benefit of the VDA, Meridian would get their mobile line transferred to it, become responsible for payment at a discount for the use of that line and then bill its customer, passing on a portion of the discount it enjoyed. If the customer was a customer of Esat Digifone they would transfer via Meridian to the Eircell mobile phone network. 

While Meridian describes itself as purchasing air time and reselling it on, this does not accurately describe its business. Meridian does not purchase air time up front which it resells. It has the benefit of a discount agreement, portion of which it passes on. 

Eircell claims it was unaware of this change in business until January 1999 when 15 of its direct customers transferred to Meridian. Eircell took objection which culminated in informing people that it would not renew the VDA. Meridian claims that there was deliberate obstruction to its business by Eircell after January 1999. 

The Plaintiff submits that the issues to be tried are: (1) Whether the Plaintiff has a contractual right to renew the agreement. It is common case that the earliest termination date will be 31 December 1999. (2) Whether Eircell is estopped from refusing to renew the agreement. (3) Whether the actions of Eircell amount to an abuse of a dominant position in the market, the product market being either (a) the market in wholesale air time for resale or (b) the market for mobile telephony services. (4) Inducement to breach of contract, injurious falsehood and intentional interference with economic interest. 

Meridian claims that Eircell is in a dominant position and has significant power in the mobile telephony market. While there was considerable case law opened, it is not for me to decide whether Eircell is in a dominant position or not. That is an issue to be tried. The abuse of a dominant position is identified as failure to supply air time if the VDA is not renewed. 

Meridian claims that damages are not an adequate remedy for it but would be for Eircell because all Eircell would lose is the discount which Meridian passes on. Meridian says it has a once-off opportunity in the emerging deregulated telecommunications market for mobile telephony services and to position itself to attract investment and form strategic alliances. It would be the end of Meridian's business if it is refused discounted air time. 

However, Eircell raises the question of the lawfulness of Meridian's operation. The right to operate a mobile telephone network or provide a mobile telephony service requires a licence under section 111 of the Postal and Telecommunications Services Act 1983. The section, as amended, is set out in Schedule 1 to the European Communities (Telecommunications Licences) Regulations 1998, SI No 96 of 1998. This requires a licence to provide a mobile and personal communications system [subparagraph (iii)] and a mobile and personal communications service [subparagraph (iv)]. 'Mobile and personal communications services' are defined in section 111(12) as "services other than satellite services whose provision consists, wholly or partly, in the establishment of radiocommunications to a mobile user, and makes use wholly or partly of mobile and personal communications systems".' 

Eircell is licensed to operate a mobile phone network, that is, 'a system', and to provide mobile phone services using that system. Meridian claims to be a 'virtual mobile phone operator', that is, it does not own a network but has access to Eircell's network and to air time at a discount under the VDA entitling it to provide a service to its customers in competition with Eircell and Esat Digifone. Meridian claims it does not require a license to do this. 

Under the terms of Eircell's current licence, which is in effect from 16 August 1991 and operates for 15 years from 16 March 1996, it is provided: 

1. Eircell is authorised to provide in the State, subject to the terms and conditions of the licence, a GSM mobile telephony service and TACS analogue services and systems (Article 3). 

2. The licence may be revoked if the licensee fails to comply with the terms and conditions of the licence (Article 5). 

3. The licence is personal to the licensee who cannot transfer or assign it without the prior consent of the Minister (Article 8). 

4. Eircell, if requested by Esat Digifone or any other mobile telephony serviced operator licensed under section 111(2) of the Act, shall make air time available on terms and conditions to be agreed for resale by the requester (Article 19). This only applies to an analogue service. 

In a proposed revision of the licence which was sent to Eircell from the Director during the course of the proceedings, Part 7 of the Schedule provides that Eircell, 'if requested, shall make air time available to a mobile telephony service operator licensed under section 111(2) of the Act upon such terms as may be agreed for resale by the requester'. It applies only to the Eircell analogue network. 

Eircell also argues that it is not in a dominant position and has no power to act independently of its competitors. Even if it was in a dominant position there has, it claims, been no abuse as it will supply on the same terms as to other customers. It will not continue to supply air time on a basis which discriminates in favour of the Plaintiff. Further, Eircell says that it is entitled to protect its own commercial interests and denies that the Plaintiff is contractually entitled to a renewal of the VDA and that the court should not grant a mandatory injunction requiring it to do business with the Plaintiff. 

As to whether there are serious issues to be tried, that is very evident, particularly in view of the fact that the matter took five days at hearing. 

The Plaintiff claims that damages would not be an adequate remedy while the Defendant says that that is not so. I think it is unreal to say that the Plaintiff could run its business without a VDA so I agree that damages are not an adequate remedy. 

On the balance of convenience, I have treated the question of the legality of the Plaintiff's action as part of the balance of convenience rather than as an ad limine issue. The Plaintiff is not licensed under section 111 to provide a mobile personal communications service and Eircell is only entitled to make air time available for resale to a licensed service operator. It is also provided in the licence that Eircell's licence may be revoked if Eircell fails to comply with the conditions. In my opinion that alone is sufficient to preclude the court from obliging Eircell to continue the VDA after it ceases to operate. 

The two cases quoted against this proposition are Pesca Valentia Ltd v Minister for Fisheries and Forestry IR 193, and Carrigaline Community Television v Minister for Transport [1994] 2 LR 359, but neither of these cases is in point. 

In Pesca Valentia the Plaintiff sought to attack the constitutionality of the material provisions of the 1983 Fisheries (Amendment) Act. Here there is no attack on the constitutionality of section 111 of the Act, as amended. 

In the Carrigaline case the Plaintiffs first requested a licence in 1985, and again in 1986, 1989, 1990 and 1992, and all requests were ignored until July 1992. No prosecution was instituted when the licence was refused. The challenge in that case was to a ministerial decision in 1992. Costello J held that the Plaintiffs were entitled to have their claim determined before criminal proceedings were instituted. 

No such considerations arise in this case. The Plaintiff does not, it says, have to have a licence. In my view the words of the statute are clear: a licence is required to offer mobile telephony services and the Plaintiff does not have one. The court will not oblige Eircell to breach the terms of its licence to supply air time to the Plaintiff as unlicensed service providers. 

As to requiring the Defendant to fulfil its obligations under the VDA, the Plaintiff claims that certain actions of the Defendant are in breach of the agreement: 

1. The Plaintiff claims that the Defendant failed to effect transfers. The Defendant does not deny a delay when the matter came to its attention in January 1999. 

However, when it was realised that clause 4(i) and (ii) were deleted, thereafter the transfer requests were processed and any delays were due to technical difficulties rather than intentional delay. 

2. The Plaintiff alleges a refusal to supply transfer forms. The Defendant says it has over 2,000 unused forms in its possession. 

3. The Plaintiff alleges interference with its customers. The Defendant wrote to customers who applied to transfer to the Plaintiff to tell them that the VDA was due to expire at the end of the year and would not be renewed, and that the Plaintiff might not be able to continue to provide services on the terms now offered. The Defendant also warned that they might not be able to regain their mobile number if it was transferred to the Plaintiff. The letter says that the Defendant did not invite them to do otherwise than comply with the terms of the contract if they were contractually committed. If they were not contractually committed, the Defendant invited them to reconsider. This is a carefully drafted letter and does not invite the former customers of the Defendant to breach any contract they may have with Meridian. 

4. The Plaintiff also claims that the Defendant discouraged people from joining the Plaintiff. This refers to a current employee who was discouraged. 

5. Lastly, there was trouble with the Brio billing system in January and February. This system gives a breakdown of usage on each line. The Defendant says there had been a problem common to all its customers using the system but that it had been sorted out. 

Until its termination and, if necessary, will give an undertaking to that effect. Whatever suspicions might be aroused by the timing of the problems which coincided with the period following the big transfer of numbers to the Plaintiff in January 1999, I am satisfied that an undertaking by the Defendant to observe the contract will meet the requirements of the situation. 

MR SREENAN: In the circumstances it might be appropriate to reserve the costs. 

MR GORDON: And if my friend will give a formal undertaking to observe the contract until the end of December 1999. 

JUDGE: Until the termination of the contract. Can you give that undertaking, Mr Sreenan? 

MR SREENAN: Yes, my Lord