Eircom: Dividends / Financials / Lawsuits

dahamsta

http://www.enn.ie/news.html?code=9368418

[...]

The [Irish Independent] says that the consortium of investors that bought Eircom 18 months ago is to take out EUR446 million in dividends, following a massive EUR2.4 billion revamp of the company's bank borrowings. Two international investment houses, Eircom employees and Sir Anthony O'Reilly will share the EUR446 million cash dividend, which is half the investment they made to buy the company in 2001. The big winners will be the Eircom employee share trust, which will receive EUR238 million, enabling it to pay off its debts and distribute a cash windfall to Eircom staff in the coming months.

The paper also reports on Eircom's 19 percent growth in earnings before interest for the year to March 2003 to EUR550 million. The increase was on the back of a 2 percent rise in turnover, which came in at EUR1.68 billion. Eircom management continued to reduce costs and shaved EUR41 million off its operating costs, largely through restructuring and voluntary redundancies. The cost of redundancies last year came to EUR63 million, while the company also spent almost EUR200 million on its capital expenditure programme, upgrading its telecommunications network. Eircom's stronger performance was reflected in operating profits of EUR180 million for the year to March 2003.

Meanwhile, the Irish Times reports that Eircom is facing more than 100 lawsuits from former employees who are seeking damages from the firm because they claim to have been exposed to asbestos. The firm is also being sued by rival Esat BT and is currently under investigation by the Competition Authority over its dealings with a subsidiary firm, TE Services (Ireland) Limited. Details of the lawsuits were revealed in the bond offer document published by Eircom on Monday. If the lawsuits are successful they could cost millions in damages.

[...]

Cuauhtemoc

What are the details of the Esat lawsuit and the competition authority investigation?


_____
C.

BKtje

You'd think they'd hold onto that money(or at least some) till those law suits were settled or maybe increase the speed at which DSL is being rolled out and increase turnover in the long run.
Guess thats too smart for Eircom.

dahamsta

Depends on your definition of smart. Eircom investors are in it for the money, period. They want to get money out /before/ it can be sucked into lawsuits.

adam

BKtje

good point, id certainly want my money back before lawsuits

dahamsta

I often wonder if the actual investors come in here at all. We know that people from Comreg, the Government and the telco's come in here regularly and we know that this goes right to the top; just not so often. The IrelandOffline forum is certainly a focal point for out-and-out hatred of Eircom, but a lot of logical commentary about their practices and procedures are often posted too.

If they do come here, I'd just like to say hi. ****. Thugs. Pigs.

adam

BKtje

Thats one way to make them feel at home and also one way of making them feel more inclined to help in some way

(cant say i disagree with ya tho )

Urban Weigl

I very much doubt they would come here. Some wanker living in New York and extracting millions/billions from our telecoms infrasctructure, why would he/she care? I know if I was in that position, I wouldn't!

flav0rflav

OK, so what's their business plan. There has been suggestions that they want to tidy it up and sell it on again. When? To who? BT wouldn't be an option as it would cause the Competition Authority some anxiety. Another big player, DT? or someone small just like Valentia who'll piss about.

Preferably it's someone big who will have a valid long term business plan and the country will benefit. So how soon will this happen? How long is their bank loan for?

Urban Weigl

They bought Eircom with its own money, i.e. they got it for free. The plan now is to extract money from Ireland's important telecom infrastructure for as long as possible, and leave a big mess for the government to clean up in a few years time.

Dustaz

Originally posted by flav0rflav
OK, so what's their business plan.

Thats the best question that can be asked at this moment in time. Were all aware that their plan seems to be to sweat eircoms assest and then sell on at a later date. As flav0r asks, to Who? and more importantly, When?

This is a company that turnsover in excess of €4 million a day (if the stats in the indo today were correct). Maybe im being naive but that sounds like an awful lot of money for an irish company. If i was a banker sitting in Gecko Towers in NYC, im not so sure if be in such a hurry to offload that.


So Who? How long? When?

Any ideas? Inquiring minds want to know.

dahamsta

It's a hefty turnover Dusty, but it's a dying business. You can only sweat those assets so long before they become obsolete. Unless Eircom has massive plans to convert to fully IP-switched networks, I can't see a long-term benefit. And it's certainly not a short-term winner. I can't wait to see the ace up the sleeve. Or should I say the rat in their hat?

adam

sixtysix

What fascinates me about this story is the extent of the union's windfall. Who ever heard of a union receiving dividend income of this nature. This is a company which is overstaffed. What hope is there of Eircom ever reducing prices when its workers control a third of the company and obviously will object to any enforced redundancy schemes.

SkepticOne

Originally posted by Urban Weigl
They bought Eircom with its own money, i.e. they got it for free.

Most of it was got for free. They put in 900 million, the rest was borrowed by Eircom to buy out the existing shareholders. More money is now being borrowed to make up for the dividend just paid out.

The plan now is to extract money from Ireland's important telecom infrastructure for as long as possible, and leave a big mess for the government to clean up in a few years time.

Yes, the real value of Eircom to Valentia is not the state of the physical assets but its pervasivensess. They can essentially hold the government and ComReg to ransom and get whatever line rental increases they require while doing the minimum to keep things going.

SkepticOne

Originally posted by Dustaz
This is a company that turnsover in excess of €4 million a day (if the stats in the indo today were correct). Maybe im being naive but that sounds like an awful lot of money for an irish company. If i was a banker sitting in Gecko Towers in NYC, im not so sure if be in such a hurry to offload that.


So Who? How long? When?

Any ideas? Inquiring minds want to know.

I reckon they will do another dividend payout in another 18 months where they will attempt to recoup the entirety of their investment. Then they will decide whether to continue.

Currently they are getting around 30% per annum return. There is no where else that this sort of money can be made.

If they decide to sell it, they should be able to sell it for far more than they borrowed on the basis of this return. They might then coose another country with weak regulation and no competition and buy up its infrastructure and repeat the process.

What would determine their decision would be whether competition appears, so far there has been very little. You can sweat the assets indefinitely unless competition appears.

De Rebel

I wrote the following in another forum last week. I didn't post it here because one of my sources asked for discretion if not confidentiality. What happened yesterday is a logical part of the build up. From the current owner's point of view its a far better thing to have the advisors to the partial re-nationalisation process squabbling over a debt mountain than a cash mountain.

Behind all the sabre rattling and the MSE talks and all the other public domain stuff there is a lot happening and Eircom are sitting on a lot of things pending the outcome. There are serious talks about splitting eircom. The infrastructure/wholesale side would have new owners, maybe Gov/Valentia on a 51/49 split. Eircom retail under its current owners (possibly with some changes there too) will then be free to compete head on in the market freed of any USO, PSO, or other "unfair" and restrictive regulatory baggage. Not alone do they have the current range of products and markets in their sights, but they will re enter the mobile market as a reseller and bring on other products as well to retain their status as "the only" full service provider. They really really want to leverage the massive foothold which they have managed to retain in the corporate market and exploit this in every way possible. Having a full range of products and being allowed to compete unfettered is what they are after. Elimination (by means of a buy out) of the ESOP is seen as a prerequisite for any of this. Plan B is to sit on everything and hold their breath until the whole mess explodes.

And all in all its probably a good thing. I'd certainly like to see the infrastructure back in public control, managed as a single unit by a single entity. And a great reduction on our reliance on ComReg, healthy competition on the retail side and the end of eircom's stranglehold would all be pluses.

Not sure what will transpire, but I think the above has as good a shot as any of the other theories.

Regarding th re-flotation/re-sale of eircom retail, that will happen, but its well down the road. It will probably wait until the market is ready to pay a premium for a performing telco, which is certainly not the case at the moment.

As for all the whinging and b1tching about what happened yesterday Eircom's Board of Directors, under company law, have one preeminent responsibility - to the owners. Thier job is to maximise the return. They were acting in accordance with their responsibilities and appear to be doing a good job in that regard.

We have ourselves to blame, we the irish People sold eircom in the first place. the rest is history.

The fact that we as citizens, taxpayers, former shareholders (not me I hasten to add) and customers have been fuxked over at least four times, with another two times on the horizon, is thanks to one person. Stand up and take a bow, Mary O'Rourke.

spongebob

O'Reilly also has a large compo claim (OF AROUND €200-300M) against the government over exclusive rights to rebroadcast UK channels...that turned out not to be exclusive after all.

Thats with his Chorus hat on not his Eircom hat.

pete

Originally posted by sixtysix
What fascinates me about this story is the extent of the union's windfall. Who ever heard of a union receiving dividend income of this nature. This is a company which is overstaffed. What hope is there of Eircom ever reducing prices when its workers control a third of the company and obviously will object to any enforced redundancy schemes.

the Union didn't get a dividend, the employees did. The company is making serious money - why shouldn't the people doing the work get a cut?

dahamsta

As for all the whinging and b1tching about what happened yesterday Eircom's Board of Directors, under company law, have one preeminent responsibility - to the owners. Thier job is to maximise the return. They were acting in accordance with their responsibilities and appear to be doing a good job in that regard.

As has been said a thousand times before, there has to be a balance of profits and ethics. That old "responsibility to the shareholders" nugget wore thin with a lot of us a long time ago. I won't subscribe to it and neither should anyone who's suffered at the hands of it. That includes everyone who's ever received a phone bill by the way. The Government has an enormous responsibility for where we find ourselves today, but so do we for voting them in, and so do the incompetent managers in Eircom, and so do the investors that drove them.

adam

sixtysix

i have no problem at all with workers getting a cut. its just that the workers are now the shareholders and have a vested intersst in keeping prices high and maintaining a larger workforce than is nescessary. ultimately by maintaining high prices in this industry it has a knock on effect on all housholds/businesses in ireland and may be putting other workers out of jobs.
its an unusual relationship to say the least.
eircom is fequently referred to as the enemy on these boards. presumably eircom workers also come under that heading.

MadsL

the Union didn't get a dividend, the employees did. The company is making serious money - why shouldn't the people doing the work get a cut?

Because this is a hugely inefficient monopoly that we subsidise daily if we want to have consumer access to fixed lines in this country. The workers (sorry, shareholders) are sitting pretty and there is massive need for huge culture change within the organisation.

Talk of splitting it in two seems to me to be a recognition of the fact that there are a whole lot of employees with state-body mentalities within eircom that simply need to be thrown overboard.

This reminds me hugely of the eircell split.

Dustaz

*brake noises*

wow, where did that come from de_rebel?

If thats true it would go a LONG way to ending the mess in this country especially if the government continues to be educated as to whats actually needed.

How reliable is that source of yours?

SkepticOne

I agree with De Rebel, that Eircom are simply taking advantage of a situation that has been handed to them. They are not in the least incompetant in that regard. Neither are they unethical by business standards. This is pretty much what most companies do. I'm sure George Soros sleeps soundly every night knowing that he is doing a good job for his clients.

The split idea is interesting but will only lead to increased fairness among the OLOs and less hassle for the regulator. The problem will still be the wholesale monopoly and this has been the problem all along.

When ever new technologies come along, this wholesale entity will be reluctant to implement them if they undermine existing revenues, e.g. DSL undermines PSTN revenue.

De Rebel

Originally posted by Dustaz
How reliable is that source of yours?

Came from two different sources. Different but overlapping information.

Nothing is certain, and not just because of the reliability or otherwise of my sources. There are a lot of balls in the air just now. What actually transpires will depend on a long series of interlinked decisions. I'd give it about a 50% chance.

spongebob

does it have any bearing on the wording of the Constitutional Referendum on private property rights?

M

pete

Originally posted by sixtysix
i have no problem at all with workers getting a cut. its just that the workers are now the shareholders and have a vested intersst in keeping prices high and maintaining a larger workforce than is nescessary.

Hmm let's see - iirc ESOT has a fixed 30% stake. How do you figure it's in the employees interest to have more people to spread those (fixed) dividends around?

ultimately by maintaining high prices in this industry it has a knock on effect on all housholds/businesses in ireland and may be putting other workers out of jobs.

One of the main benefits of having employees involved in a share ownership trust is that it's in their interest for the company to perform well. So surely improving the efficiency of the company is in their interest?

its an unusual relationship to say the least.
eircom is fequently referred to as the enemy on these boards. presumably eircom workers also come under that heading.

Quite.

sixtysix

its the inherent contradiction that intrigues me. unions have a policy of one for all, all for one. this is a unique situation where the workers have a large shareholding. it almost compromises the role of their union. when the Communications Workers Union
criticises comreg-they do so as representatives of the shareholders.
what would Lenin think at all?

spongebob

Originally posted by sixtysix
what would Lenin think at all?

Lenin would have shag all chance of engaging Biddy in any form of "Dialectic" , she would cut him off, leave him on hold or give him a wrong number to ring. Then he'd get really pissed off when he found out that his username on Boards was taken

M

dahamsta

Originally posted by Muck
Then he'd get really pissed off when he found out that his username on Boards was taken

ROFL

I was going to say that he'd spin in his glass box, but that just puts it to shame!

adam /who saw lenin up close and personal