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ComReg consults on Eircom's cost of capital

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  • 01-11-2007 5:05pm
    #1
    bealtine
    Registered Users Posts: 4,051 ✭✭✭


    ComReg consults on Eircom's cost of capital
    Thursday, 1 November 2007 13:09

    http://www.rte.ie/business/2007/1101/comreg.html?rss


    The Commission for Communications Regulation has issued a consultation paper on the cost of capital that Eircom should be allowed.

    ComReg says this is a key input to the return Eircom is allowed to earn on its fixed-line business and is known as the Weighted Average Cost of Capital.

    The regulator says it is important to set the correct value of the WACC to ensure that the correct regulated prices are achieved. It is also necessary to ensure that Eircom does not obtain too high a price at the expense of the consumer. Too low a price would also see Eircom under-recover its costs and compromise investment.
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    ComReg's consultation paper suggests that Eircom's WACC should be somewhere between 7.8% to 11.1%. Eircom's current WACC is 11.5%.

    The regulator welcomes submissions from all interested parties and the consultation period will last until December 13.


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    #2
    Tom Young
    Legal Moderators, Society & Culture Moderators Posts: 4,338 Mod ✭✭✭✭Tom Young


    This is usually apparent from the separated accounts. Its an interesting exercise though as many telco's are lower than 11.5%. The WACC will have a fundamental effect on pricing.


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    #3
    bealtine
    Registered Users Posts: 4,051 ✭✭✭bealtine


    Tom Young wrote: »
    This is usually apparent from the separated accounts. Its an interesting exercise though as many telco's are lower than 11.5%. The WACC will have a fundamental effect on pricing.

    In a normal enough world this would be the case. This, however is the kafkaesque world of Comreg, somehow they will find a way to jack up
    prices to the consumer.


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