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Weaknesses in the management of BaneTele AS - Doc. No. 3:10 (2003-2004)

The Norwegian Ministry of Transport and Communications, the Norwegian National Rail Administration and the management of BaneTele AS have not been able to exert sufficient control over the operations in BaneTele AS. The organisational model that was chosen was complex and demanding and entailed that the roles of the various players were ambiguous.
Published 4/29/2004 1:10 PM

This is the main conclusion in the OAG’s study of the Ministry of Transport and Communications and the Norwegian National Rail Administration’s management of BaneTele AS and the Ministry’s administrative processing of the Government loan to the company. This study, Document no. 3:10 (2003-2004), was submitted to the Norwegian Stortin­g on 29 April. The study has been conducted at the request of the Storting and mainly covers the period from 1 July 2001 to 31 December 2002.

The company’s management and financial problems were triggered by BaneTele AS’s purchase of the broadband business from the estate in bankruptcy of Enitel ASA in September 2001 while lacking sufficient funds to completely finance the new business. In March 2002, BaneTele AS applied to the Ministry of Transport and Communications to be allowed to convert the Government loan that had been granted when the company was established into equity. According to the OAG’s assessment, the Ministry spent too much time processing the application from BaneTele AS, at the same time as it stuck for too long to unrealistic alternatives to converting the loan into equity. Thus, the Ministry may have helped intensify the problems that BaneTele AS was having with their operations.

According to the OAG’s assessment, matters pertaining to business and administration became somewhat confused with each other. Among other things, the Norwegian National Rail Administration directly delegated responsibility for developing and operating the new emergency communications system for the railroad (GSM-R) to BaneTele AS. Furthermore, close ties were established between the Norwegian National Rail Administration and BaneTele AS through the composition of the board of directors, the company’s ownership of transmission equipment, and the scheme for the payment of a lease for the telecommunications infrastructure, which BaneTele AS leases from the Norwegian National Rail Administration. This also entailed that the Norwegian National Rail Administration’s roles as owner of BaneTele AS and as a major player in matters pertaining to railway policy became somewhat confused.

The Ministry of Transport and Communications did not sufficiently monitor whether the Norwegian National Rail Administration established and operated BaneTele AS in accordance with the Storting’s requirements. The Ministry should also have intervened in the direct assignment of the GSM-R work at a much earlier point in time.

The Ministry of Transport and Communications thinks that they have handled the management challenges that arose with regard to BaneTele AS, in an orderly way. The Ministry states that it was important to look after the Government’s interests in the company both as owner and lender. At the same time, the Ministry emphasises that it was important to avoid letting the company be used in such a way that it could be argued that the company was given special advantages relative to its competitors.

This document can be obtained in Norwegian from The OAG’s web site – www.riksrevisjonen.no – or ordered from the University Bookshop Akademika, tel.: +47 22 11 67 70.

Riksrevisjonen, Storgata 16, P.O. Box 8130 Dep, 0032 Oslo, Norway

Phone: +47 22 24 10 00

Org.nr: 974 760 843