Criticism of Eircom continues.....

Mr_Man

Vincent Browne has a go at Eircom in his column in to-days Irish Times. One interesting point he makes is that the amount of investment Eircom is planning to make is less than that needed to maintain the network at its current (low) level of repair.

If this is true then things are going to get worse rather than better unless Comreg step up to the plate and do a proper job of protecting the interests of users in Ireland.

M.

Xian

For this piece of business brilliance, Mr. O'Reilly is extolled (again) in the columns of one of the newspapers he owns here, the Sunday Independent. Last Sunday, its otherwise fearless and outspoken business editor, Senator Shane Ross*, (under the heading "Eircom chiefs make a silk purse out of a sow's ear") gushed: "The transformation of Eircom has been dramatic. In barely 18 months, Tony O'Reilly, George Soros and Providence Equity Partners have turned the company around." !

*One of the champions for the disgruntled shareholders who "in a very forceful speech" at the Eircom AGM in 2000 "took the [pre-Valentia] Board to task, over the level of salaries, bonuses and fees being paid".

sceptre

Originally posted by Xian
Anyone got a copy of the Sindo?

Good lord no. If I feel like buying a crap newspaper where they make things up and occasionally say nice things about the owner for no particular reason, I'll buy the Weekly World News.

However, from their freebie site:

Eircom chiefs make a silk purse out of a sow's ear
THERE are few more annoying feelings. You sell the shares. And then the value of the company begins to soar. The transformation of Eircom has been dramatic. In barely 18 months Tony O'Reilly, George Soros and Providence Equity Partners have turned the company around. So dramatic indeed, that they are now confident of raising €1bn in the bond market.

If poor Alfie Kane had headed for the bond market with rocky old Eircom mk1 in tow, he would have been laughed to scorn.

Today, Eircom's roadshow in the US is telling a happier tale. Eircom's endemic overmanning is under control. Eircom has shed 1,700 of the workforce - with voluntary redundancies - in 17 months. The current workforce is nearly as happy as the proverbial pig. Their commitment to the company has already been handsomely rewarded. Each member of the Employee Share Ownership Trust has been awarded a dividend. In December each qualifying member of staff will receive €6,000.

There has been no industrial unrest. And the promise of future dividends for the staff makes it even less likely.

A promising model for future privatisations may have been set. Admittedly, if Bertie has his way, they are already on the long finger; but if the workforce begin to respond to shareholdings in their companies, threatened obstruction of progress at Aer Rianta (and even CIE) could evaporate.

Yet the good news is all a bit agonising for small shareholders of Alfie's era. We will always ask why Alfie and Ray MacSharry could not do what the new owners have done.

The problems at Eircom were not intractable after all. I have often wondered why Tony O'Reilly was not asked to chair Eircom through its painful transition to the private sector. MacSharry had plenty of fine personal Fianna Fail qualities, but his business acumen was hardly in the O'Reilly/Soros division. He would scarcely have held the international clout to bring global venture capitalists into the picture - and would probably never have been able to tap the international bond market the way O'Reilly could.

The bond issue is almost certain to be a success. Global investors are being asked to buy into Ireland Inc and the Eircom mk2 story. Part of the company's sudden success is due to the imitation of the American model of giving employees options or a real stake in the business. It injects a bit of realism into some of those who had previously found militancy more profitable.

Success with cutting Eircom's crazy costs is not the only recent improvement. Against the odds, revenue is up too. Even as fixed lines seem to fall out of fashion, Eircom has managed to improve its revenue by two per cent, while it achieved a price of nearly €200m for the sale of the Golden Pages.

All this makes us shareholders in Alfie's old disaster green with envy. Worse still, Eircom has determined to challenge Vodafone in the mobile market as soon as the non-competition clause runs out in May 2004. We are nearly all shareholders in Vodafone because Alfie sold our mobile section off for devalued shares in the telecoms giant.

The Eircom bond will come to the market this week. It will be listed on the Irish and Luxembourg stock exchanges and is likely to be traded in New York. Banking sources are saying that it could pay an interest rate of as much as 8 to 9 per cent on subscription. Initial capital will be repaid in full in 10 years.

Little if any of the bond issue is likely to be placed in Ireland. US investors will look at the investment as a play on the Irish economy, at the last 18 months of dramatic change in the company and at the future prospects for this slimmed-down two-year-old whose mother was a donkey.

They should be happy enough. The company intends to reduce the headcount by almost another 1000 by the end of 2004, to re-enter the mobile market and to grow the fixed-line business through broadband. It will then be in the sort of condition which might prepare it for a stock market flotation - the sort of nick it needed to be in back in 1999 when Alfie brought the dinosaur to the market.

And we can then all buy back into Eircom, transformed into an unrecognisably reformed company. Would you? No thanks, it would simply hurt too much. But I would like a bit of the bond all right.

Shane Ross

Next time I see Senator Ross buying bottled water in that shop on the corner of Aston Quay and Westmoreland Street I'll think about whether to boo or not. He isn't quite "gushing" mind you. Probably knows what side of the freelance journalism is buttered though.

ednwireland

nothing to do with tony o'reilly owning the indo papers then
just accurate reporting then
no mention of eircom reducing its investments, screwing its customers and dragging its heels over broadband and friaco to maintain its call business.

dahamsta

I talked to Ross once on the phone, I think about the IrelandOffline Blackout. He sounded like someone that likes the horsies, foxhunting, champagne, cucumber sandwiches and his sister, if you catch my drift.

adam