O'Reilly hits back at Eircom critics

damien

http://www.rte.ie/business/2004/1013/eircom.html

Eircom chairman Dr Tony O'Reilly has defended the company's record at its AGM in Dublin today.

He told shareholders that Eircom was 'at times quite unfairly and deliberately over-criticised'.

Dr O'Reilly said the company could not be criticised for being a monopoly, while it was at the same time 'lumbered' with universal service obligations not borne by companies such as Vodafone and O2.

He also hit out at critics who called for cheaper access to the Eircom network while those of Vodafone and O2 'remain tightly closed'.

Referring to the losses incurred by people who invested in the first flotation in 1999, Dr O'Reilly said this was not an Eircom or an Irish phenomenon, claiming that shareholders in the first flotation outperformed the whole telecoms market.

Dr O'Reilly also defended Eircom's investment in its network, including broadband, saying that this had been above the EU average in every year since privatisation.

He called for the 'over-regulation' of Eircom's retailing activities to be lifted, and rejected claims that Eircom had dragged its heels on opening up the market.

Dr O'Reilly also said Eircom 'must get back into mobile' but needed help from the regulator and the Government.

There's a piece in the Irish Times this morning too about this if anyone wishes to post it.

Well done to IrelandOffline and it's supporters for pushing the broadband agenda. Having Tony answer these issues at the AGM is a statement on our campaigning.

vinnyfitz

damien.m wrote:

There's a piece in the Irish Times this morning too about this if anyone wishes to post it.

This bit?
Eircom plans to have mobile strategy in 2005
By Cliff Taylor




Eircom will have a clear strategy on how it will enter the mobile market by early next year, according to chairman Sir Anthony O'Reilly. He indicated that one option could be the acquisition of Meteor, the third mobile operator.

"This ain't the long-finger exercise," he said, adding that the company was examining all available options to enter mobile telephony and believed if it did so it could bring down the cost to customers substantially.

Eircom can enter the market by buying a competitor, building its own network or piggy-backing on an existing network. The company complains that under current regulatory rules it cannot get access to Vodafone's and O2's mobile networks at a reasonable cost. If it could do so, then Eircom could become a mobile virtual network operator (MVNO) by offering its own service and paying a percentage to one of the network providers.

The current regulatory regime was "very unfair" because it obliged Eircom to open its network to competitors at cost, but did not allow it access to other company's networks on similar terms, said Sir Anthony, speaking after the company's annual general meeting.

If Eircom could get access to a mobile network at a reasonable price "we will give you the Ryanair of mobiles," he added.

Company chief executive Mr Phil Nolan said he believed that the telecoms regulator had the power to introduce changes to the market which would be "extremely helpful to Eircom," in its desire to re-enter the mobile market. However, whether the regulator would do this was another question. A consultation process with the regulator is due to come to fruition in November, he said, and the company feels that this will help to clarify its options.

Sir Anthony also clearly signalled that an acquisition of the smallest mobile operator - Meteor, owned by Western Wireless - was a live option. If Meteor's owners were realistic and prepared to see that a joint investment could increase its current market share from 3 per cent towards 20 per cent, then a deal could be done which would benefit everyone, including consumers, he argued. Meteor's value to a company like Eircom would partly depend on the regulatory regime, he pointed out, with the price it would pay falling the more the option was open of piggybacking on another network.

Building a new mobile network seems the least likely option for Eircom to pursue, given the expense and length of time involved. However Mr Nolan was adamant that a return to the mobile market was on the way.

"We are a commercial company and we will find a commercial way of doing something," he said.

Both Sir Anthony and Mr Nolan were highly critical of telecoms market regulation since liberalisation.

A poor regulatory environment had seriously hit the development of cable in Ireland, Sir Anthony said. Cable would never be a competitive force in the wider telecoms market "because the regulator buried it," partly by freezing the price that NTL and Chorus could charge customers.

"Zealotry and ideology have played too large a part" in regulation, according to Sir Anthony. No politician is going to stand up for Eircom, he said and the regulator sees "no political mileage" in addressing the company's concerns.

Eircom believes that this is part of a lack of clarity and direction in the Government's overall approach to the telecoms sector. Regarding the contentious issue of broadband provision, Mr Nolan says that around 80 per cent of homes can eventually be connected economically, but that connecting the remaining 20 per cent will never yield a commercial return.

However, the company criticised the Government's approach of building fibre rings around some major towns to provide broadband, saying that in many instances this is duplicating Eircom investment. A more efficient approach could have been developed, Eircom believes.



© The Irish Times

AndrewMc

I noticed, too, the article Tech weakness keeps Irish ranking low was next to it (on Aertel, anyway):

http://www.rte.ie/business/2004/1013/wef.html

The third paragraph kinda kicks it back at Eircom/Comreg.

bringitdown

http://www.unison.ie/irish_independent/stories.php3?ca=184&si=1267359&issue_id=11539

Eircom want the mobile networks opened up! - COUGH COUGH - POT, KETTLE, BLACK

Level playing field my arse.

viking

Dr O'Reilly also defended Eircom's investment in its network, including broadband*, saying that this had been above the EU average in every year since privatisation.

Once again eircom cover the truth about their capital expenditure spending, a quick quote from Eircom's SEC filing tells the real story:

[eircom’s] level of depreciation charges… currently exceeds capital expenditure and is likely to do so for the next three to four years

Now, now, stop bullshítting us, tell the truth to all the Irish boys and girls!

The current regulatory regime was "very unfair" because it obliged Eircom to open its network to competitors at cost, but did not allow it access to other company's networks on similar terms, said Sir Anthony

Obviously its only a matter of time before the other networks will be opened up. Lets hope they use the LRIC model (as eircom did) when working out the price for access to their networks. That should tie things up in the Four Courts for a few years...

A poor regulatory environment had seriously hit the development of cable in Ireland, Sir Anthony said. Cable would never be a competitive force in the wider telecoms market "because the regulator buried it," partly by freezing the price that NTL and Chorus could charge customers.

Thank fluck says eircom. But isn't this statement a possible conflict of interest from Tony over two businesses that he is a major stakeholder in? Or did he sell his INM stake in Chorus?

"Zealotry and ideology have played too large a part" in regulation

With respect to people working in Comreg, I don't think anybody here could describe ComReg as being overzealous or fanatical in its approach to Telecomms regulation. However, Sir Tony would have us believe the total opposite...

That article in the Irish Times gave me a good laugh.

*Is Tony now including the BB investment figures in the capex figures for maintaining the network? Very bold...

Sleipnir

What bull. Vodafone and O2's networks were never funded by the taxpayer. They own their own networks.
The taxpayer did pay for Eircom's network.

viking

Another piece in the Irish Times:

Quiet meeting offers O'Reilly chance to rebuff criticisms
By Cliff Taylor

Four years ago 4,000 angry Eircom shareholders turned up at a fractious Eircom annual general meeting at the RDS. Yesterday a handful of shareholders and a few dozen advisers showed up for its first annual general meeting since re-listing.

The surroundings of the Portmarnock Hotel and Golf Links Hotel in north County Dublin were a good deal more tranquil - and there were big savings on the shareholder entertainment bill.

However, the company clearly still feels somewhat beleaguered, arguing that it suffers undue flak, partly as a legacy of the losses suffered by most of the 450,000 small shareholders who invested in the first flotation.

The company "is at times quite unfairly and deliberately over-criticised," according to its chairman.

Sir Anthony put the case in an unusual and trenchant 35 minute address to the a.g.m. Others have argued that the Eircom float and the subsequent collapse in the share price is a serious block to future privatisations.

However, Sir Anthony argued that, in time, the Eircom privatisation would be seen as "a pioneer in the context of Ireland's new economy".

The goals of the privatisation as set out by the Government had been met, he claimed, with the company accessing international equity, competition emerging in the market, the maximising return to the Exchequer and promoting wide share ownership.

The board and management at the time did its best for shareholders and "courageously managed the decline in the face of great public unpopularity", he argued.

The return of 78 per cent on their original investment meant "the shareholders in the first IPO actually outperformed the markets" which collapsed as the dotcom bubble burst.

The company disputes the view that large dividends now being paid out are limiting investment in infrastructure, which Sir Anthony argues remains at or above the EU average.

The chairman also wanted to "nail a particular lie used by some journalists that the slow investment in broadband inhibited foreign investment in Ireland". High inward investment proves this is not the case, he argued.

Sir Anthony also hit out at "the overall inadequate return on capital allowed by the regulator", the "over-regulation of Eircom's retailing activity" and the fact that it cannot access competitors' networks at a reasonable cost.

This is a key issue as the company looks to boost profits and enter the mobile market. Public criticism is one thing, but regulation affects the bottom line.

© The Irish Times

damien

Hog-tied, fixed-line Eircom wants closed-shop mobile market freed up

Eircom chiefs are fuming at over-regulation in the land-line market, while facing great difficulty entering the mobile market by 'under-regulation' of the tightly held networks

EIRCOM is gearing up for a re-entry to the mobile phone market. Such a move would lead to a major shake-up in what has now become 66pc of the total voice telephony market in Ireland.

It could also prompt a price war, forcing operators to slash mobile charges.

The details of the how and when have yet to be worked out, but by early next year the company expects to know how it will proceed. A regulatory review takes place next month, and its outcome could shape the make-up of the mobile telephone sector for the future.

'The way forward' for Eircom depends largely on what the telecommunications regulator decides to do. Regulation of telecommunications has become more than just a bugbear of the former State company, but something which ultimately impacts on all users of telephone services.

Eircom chairman Sir Anthony O'Reilly believes the fixed-line market is over-regulated, to the detriment of investment. He points to the examples of Chorus and NTL, which were dogged by problems in the phone markets. "It took four years to get a price increase for Chorus through. Over-regulation left them (Chorus and NTL) short of blood supply," he said yesterday.

Regulation impacts on most aspects of Eircom's business, including what it can charge. A regulatory cap allows Eircom an 11.5pc return on capital, compared to BT's 13pc in the UK.

The regulator has cited a lower Corporation Tax level in Ireland as a justification for this lower yield, according to Eircom chief executive Phil Nolan, something which he believes negates the whole logic of attracting investment through lower tax.

There are only three ways Eircom can get back into mobile; buy it, build it or piggyback on another provider's network. Despite possible pitfalls in all three, Sir Anthony is determined to forcefully pursue the company's return to this lucrative business.

When it comes to buying it, there is realistically only one company to buy and that is Meteor. Eircom is examining all options. The biggest issues there are the willingness of Meteor shareholders to sell and at what price.

Building a mobile network of its own is not really viable. Firstly it needs a licence. There are 3G licences but they contain "unacceptable conditions", according to Sir Anthony.

The alternative is for Vodafone and O2, the dominant market players in mobile, to open up their networks to other operators, including Eircom. This is referred to as an MVNO, and such a move would allow telecommunications companies like Eircom to 'piggyback' on the existing mobile networks.

Eircom makes its case by pointing to the level of regulation it endures in relation to prices and the cap set on the return it can achieve on its capital. The former State company believes the mobile operators should be forced to open up their networks in the same way Eircom has been forced to open up its infrastructure. "Equity demands that they should be opened up," Sir Anthony said.

Eircom chief executive Phil Nolan refers to an "asymmetry" in the regulator's treatment of fixed line compared to mobile.

Referring to some of Eircom's critics, Sir Anthony said: "They cannot call for a cost-driven price structure for connection to Eircom's network while Vodafone and O2's networks remain tightly closed to other operators, and importantly are 15 times more expensive for operators to connect to than Eircom's network."

The GSM licences through which the two main mobile phone companies offer services did not include a clause which meant they had to open up their networks to other users. So they can argue on the basis of the terms of their licences that they are not obliged to change that situation. However, when that is put to Eircom, Phil Nolan points out that the regulator recently designated them as having "significant market power", and under that definition he maintains there are remedies the regulator can and should apply.

Exactly what those remedies might be is a matter for the regulator.

eircomtribunal

bringitdown wrote:

http://www.unison.ie/irish_independent/stories.php3?ca=184&si=1267359&issue_id=11539
.

"The chairman of the former State company also defended its track record on broadband, saying prices were equal to or below the EU average, as was the group's investment in broadband."

Tony thinks he can lie at will. Irish bb prices are neither equal nor below the EU average, as a look at Comreg's latest figures prove.

P.

eircomtribunal

damien.m wrote:

Hog-tied, fixed-line Eircom wants closed-shop mobile market freed up

If we don't write to the Indo, nobody else will.

P.


Contact the Irish Independent

To contact the business department: finance@unison.independent.ie

To send a letter to the editor:
independent.letters@unison.independent.ie

damien

Dr O'Reilly said the company could not be criticised for being a monopoly, while it was at the same time 'lumbered' with universal service obligations not borne by companies such as Vodafone and O2.

But Vodafone has REAL competition from O2 and Meteor and O2 has REAL competition from Vodafone and Meteor. It's not like Vodafone owns 99% of the infrastructure and the rest have to get access to it through a complicated 50 step process with a charge at each step with the total cost being the second most expensive in Europe.

There is no alternative fixed line infrastructure, there is no other universal last mile in competition with them.

Since a phone line is a necessity and they own 99% of them they should be content that they have an obligation. It's not like it's strict. They only need to guarantee voice not data, the "line" can be split between a few people and for all that they get one of the highest line rental fees in Europe.

dahamsta

I'll spit some venom at the "Independent".

adam

seamus

damien.m wrote:

But Vodafone has REAL competition from O2 and Meteor and O2 has REAL competition from Vodafone and Meteor. It's not like Vodafone owns 99% of the infrastructure and the rest have to get access to it through a complicated 50 step process with a charge at each step with the total cost being the second most expensive in Europe.

There is no alternative fixed line infrastructure, there is no other universal last mile in competition with them.

Since a phone line is a necessity and they own 99% of them they should be content that they have an obligation. It's not like it's strict. They only need to guarantee voice not data, the "line" can be split between a few people and for all that they get one of the highest line rental fees in Europe.

That's the big statement that needs to be hung, drawn and quartered.

I don't think IOFFL would be snapping at eircom quite so much if Esat BT and UTV had their own last mile connections, covering most, if not all, of the same areas as eircom.

A more accurate comparison would be if Vodafone had the only mobile network in the country, and Meteor and O2 were simply buying airtime wholesale from Vodafone. Which they're not. A good deal of Vodafone's network was built with taxpayer money (and eircom got a very good price for it, lest Tony forget), but they continue to maintain and upgrade that network, as well as actually making a good effort to make the same services available to all subscribers.

This is going to be Dr. O'Reilly's (it's not "Sir Anthony" this side of the water Tony) new manifesto. Eircom are eyeing up a return to the mobile market. This will allow them to start single billing for mobile and fixed calls, and maybe even roll out a fixed mobile phone (like a landline that's a mobile too), and eircom know that the OLO's in the mobile market won't let them in without a fight. They'll be scared. Single billing will steal a lot of customers, particularly when they can start giving packages (free calls to local numbers from your mobile anyone?) based on both mobile and fixed calls, since they'll have control over the cost of both.

Tony knows this, and is starting his campaign early. If he starts stamping his feet now about the cost of access to mobile networks, and anti-competitiveness in the mobile market, the media will pick it up because they hate the mobile operators, and then Tony can lean on ComReg to start forcing tighter regulations, capping prices for access to people's networks, all sorts of competitive-orientated regulations, and then eircom can stroll in unrestricted, and pick up access to mobile networks at a fraction of what they'd have to pay now.
All safe in the knowledge that ComReg will force this stuff on mobile operators, but leave his beloved fixed-line monolith unscathed.

IOFFL needs to start now. Tony's claims about anticompetitiveness need to be debunked. His claims of how much more dedicated eircom are than the mobile operators need to be disproven. His bleating about availability of alternatives completely blown out of the water. Ireland Offline needs to make it clear that this is the biggest case of name calling between kitchen utensils since G.W. Bush started going on about an Axis of Evil.

Not so that eircom don't get cheap access to the mobile networks, but so that ComReg can see that whatever they enforce on the mobile operators, they absolutely must enforce on the fixed-line operators, to maintain competition and transparency in the Irish telecommunications market as a whole. Eircom in their current state getting access to a wholly liberalised mobile market would be a devastating blow to the Irish consumer.


</end_rant>

DonegalMan

vinnyfitz wrote:

This bit?
Eircom plans to have mobile strategy in 2005
By Cliff Taylor

"Zealotry and ideology have played too large a part" in regulation, according to Sir Anthony. No politician is going to stand up for Eircom, he said

.. the company criticised the Government's approach of building fibre rings around some major towns to provide broadband, saying that in many instances this is duplicating Eircom investment. A more efficient approach could have been developed, Eircom believes.

This follows David McRedmond's piece in the Sunday Times last week where he suggested that "Government can also help by designating Eircom as an essential service" and his proposal that "the government could direct funds, in partnership with Eircom, to complete the job of rolling out the service to everybody in Ireland. "

This smells to me suspiciously like a company that is running out of cash and is preparing the ground to seek assistance from the Government.

jmcc

And to think all this kerfuffle about Eircom and the mobile market would not be necessary had the cretins in Eircom's former management held on to Eircell instead of selling it at the bottom of the market. Those guys should be taken out, put against the wall and shot as traitors.

As for that that orange faced git, the gombeen man O'Reilly, the terms pig and poke spring to mind. O'Reilly and his pals plundered a national resource and this time the people are going to be somewhat more wary. As for the government bailing Eircom out, I think that they have something different in mind. Eircom should be restricted by legislation from getting back into the mobile business in Ireland unless it massively invests in the upkeep of the last mile network and infrastructure and opens it to competition.

Regards...jmcc

d-j-k

JMCC,

To be fair to eircom, if I remember correctly, selling off eircell and cablelink was a legal requirement as part of the libralisation process.
Ownership of eircell and cablelink was seen as a conflict of interest.

Also, their infrastructure's reasonably good. I really can't see any problems with it. All modern digital stuff with plenty of fiber. They do over-charge for access though.

Also, remember due to our horrendously badly planned cities with some of the lowest density populations in western europe that fixed line telephone providers and cable companies do face particularly difficult challenges. The cost per head of population to provide any service here is substantially higher. That goes for gas, water, electricity, telephone cable ... etc and has at least been partly responsible for difficulties with DSL.

I do think there is poor regulation but it's not necessarily the regulator's fault. The entire appraoch to telecommunications planning in this country is very weak.


Also, regarding the conflict of interest regarding Tony O'Reilly and Chorus... Independent media off-loaded their share holding in Chorus some time ago. It is now a 100% owned subsiduary of US cable company Liberty Media.

SkepticOne

d-j-k wrote:

JMCC,

To be fair to eircom, if I remember correctly, selling off eircell and cablelink was a legal requirement as part of the libralisation process.
Ownership of eircell and cablelink was seen as a conflict of interest.

Pretty sure it was just cablelink and this was sold while Eircom was under mainly Government ownership. I'm not sure it was a legal requirement or just government policy.

Eircell was sold after privatisation without compulsion.

jmcc

d-j-k wrote:

Also, their infrastructure's reasonably good. I really can't see any problems with it. All modern digital stuff with plenty of fiber. They do over-charge for access though.

And the name of the forum here again d-j-k?

The last mile of Eircom's infrastructure seems to vary considerably in quality. The backbone seems better developed and maintained. At a guess, some of the more technologically aware in Eircom's management will be hoping for the advent of WiMax and other wireless based solutions. It is the only viable way of covering some areas apart from resorting to satellite coverage. Ireland's topology is just too varied for one technology to cover it properly.

As SkepticOne pointed out, Cablelink was sold at the top of the market effectively by the government. However Eircell was sold by the morons on the board of Eircom after flotation, at the bottom of the market. They effectively managed to destroy Eircom to such an extent that that traitor O'Reilly and his pals could take it over.

I do think there is poor regulation but it's not necessarily the regulator's fault. The entire appraoch to telecommunications planning in this country is very weak.

However O'Reilly and his pals got into Eircom strictly to plunder it. I don't see why they should be shown any mercy. These guys knew what they were doing. They did the due diligence investigation before they took it over.

Also, regarding the conflict of interest regarding Tony O'Reilly and Chorus... Independent media off-loaded their share holding in Chorus some time ago. It is now a 100% owned subsiduary of US cable company Liberty Media.

As I recall, Chorus just sat on the licences they were awarded for wireless (FWA). The company was effectively bankrupt when it was sold. It was not a case of conflict of interest - it was a case of getting their money back.

Regards...jmcc