[Sunday Business Post] Investment bank IBI proposes Eircom nationalisation.

trekkypj

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=IRELAND-qqqm=news-qqqid=41360-qqqx=1.asp

Would love to hear more about this...

bk

Seriously, the government need to tell the investment bankers to f**k off.

If the government was to re-nationalise Eircom, it would cost between 4 and 5 billion (debt + pensions), and all they would end up with is an old, outdated decrepit network.

For the same 4 to 5 billion they could run brand new fibre optic cable to every home in Ireland and end up with a world class telecommunications infrastructure, that would be a far better investment of our money.

What the government should do is leave Eircom go to the wall and then pick up any valuable pieces left over for a song.

If this goes ahead, I'm fecking leaving the country, bloody madness.

croo

There seems to be a big push to get everyone used to the idea of nationalising Eircom... just about every newspaper now has had articles saying how eircom are pivotal, strategic or as here "Eircom is considered crucial to government plans".

Of course IBI saying it means nothing they are just after a little work ... I'm sure their is a sweet fee for handling any such action.

But the Irish government making statements to the Australian stock exchange is surprising. I mean when it came to Aer Lingus here, a company in which they have a substantial investment... they cannot say anything because it's a commercial issue. They have no investment in eircom and still feel they can comment in a foreign stock exchange? Not sure who is pushing this agenda.

watty

I used to think there was some corruption and cronyism and nepotism in Irish Politics. If this happens BEFORE eircom goes bust, I'll assume it's all ineptitiude.

Unless any of the 4Billion plus is owed to anyone connected to Government. Who are the dbts with and has any been sold on etc?

trekkypj

It's all very well to say for €5bn you can have a fibre network - but you need to justify building it by having customers to use it and bring in revenue. For good or ill Eircom holds the vast majority of fixed line telephones in this country and they're not going to go bust overnight. And they don't have the money - so can we afford to wait another 2-3 years before eircom collapses of its own accord? I think not!

We've had to wait far too long already, that's why nationalisation is needed. It's unpalatable to me too, but if it brings about open access and proper competition between the telcos on an equal access basis, it's better for everyone.

The trouble is, if the government had any stomach for spending billions of euro on fibre networks they'd have done it when they built the MANs. It was a missed opportunity and one which won't come again soon.

Personally I think the best option is a public-private partnership with the state administering access to the network and dealing with faults and installation, while the telcos invest the money they'd have spent on their own infrastructure to build the fibre network.

The debt is the big problem. It needs to be taken off the books somehow, otherwise nobody will invest. The government could renegotiate the debt into longer term loans far easier than eircom, or the investment funds, could do by themselves. That is what needs to be done.

Bond holders are unlikely to accept a discount on what they are owed so the Government needs to step in, nationalise Eircom and Meteor for say €150m and get the debt renegotiated over a longer term, then use the revenues for two/three years for network-building until the network is done, then functionally split into Retail and Networks, like the ESB. State keeps the network and sells the retail arm, pays back the loan from the proceeds, and we're all happy.

Let's not forget that Eircom is actually a good revenue-generator, and Meteor is doing great for them - it's the debt repayments and management decisions by speculative investors to load Eircom with debt which is crippling their ability to invest in the network.

bealtine

bk wrote: »

Seriously, the government need to tell the investment bankers to f**k off.

One has to wonder if there is much cash owing to IBI?
Perhaps they are heading up one of the 3 other "mysterious" approaches?

Maybe this their real motivation for making such an approach?

bk

trekkypj wrote: »

It's all very well to say for €5bn you can have a fibre network - but you need to justify building it by having customers to use it and bring in revenue. For good or ill Eircom holds the vast majority of fixed line telephones in this country and they're not going to go bust overnight. And they don't have the money - so can we afford to wait another 2-3 years before eircom collapses of its own accord? I think not!

NO, NO, NO, it is ridiculous bull****

Yes, we must leave Eircom collapse on it's own accord and yes we can wait two or three years for it to happen.

If the government started laying fibre to peoples home, offering 100mb BB, phone service and perhaps even TV for a low price, just like they do in Sweden and Norway and as they are planning to do in Australia, of course people would flock to it and it would start bringing in revenue over night and yes at the expense of Eircom, but why should we care, they made their own bed, now they need to sleep in it.

What I'm suggesting is the government create a whole new company, transfer the fibre networks of all state owned companies to it (ESB, Bord Gais, Irish Rail, MAN's etc.), allow other private companies to buy into it by transfering their own fibre networks into it (UPC, Smart, Magnet, Vodafone, etc.). You probably wouldn't even need 4 billion then, 2 billion would probably enough to wire every home in Ireland.

Yes even Eircom could buy into the company, transfering their fibre in, if they wanted to, but not saddling their stupid debt on the new company.

This would be a vastly better way of spending our money, then wasting it buying a decrepit network just to the line the pockets of slimy foreign venture capitalists.

What would we get for 4 billion + in buying Eircom?

- A crappy ADSL (not even ADSL2+) network
- A crappy rotting POTS network.

Versus for 2 to 4 billion:

- A future proof, world class fibre to the home network throughout the whole country.

Even if we buy Eircom at 4 billion, over the next 10 years we would then have to spend another 2 to 4 billion rolling out a next gen fibre to the home network anyway.

I honestly can't believe anyone is buying into this BS, if you are, then I've a lovely bridge to sell you.

SkepticOne

trekkypj wrote: »

Bond holders are unlikely to accept a discount on what they are owed so the Government needs to step in, nationalise Eircom and Meteor for say €150m

Surely they would have to accept whatever was left after Eircom went bust. What options would they have? If you hold bonds of a company it is one of the risks you take.

trekkypj

SkepticOne wrote: »

Surely they would have to accept whatever was left after Eircom went bust. What options would they have? If you hold bonds of a company it is one of the risks you take.

One word.

Lawyers.

Many of the bond holders are most likely institutional corporate investors, hedge funds and investment funds etc....

Just a hunch but I'd say they would tend to be litigious when their investment gets decimated.... words like fiduciary duty can be thrown out there and suddenly it's an unholy legal mess with a loooong wait for a solution.

They'd more likely take a loss if they get something for definate back today than maybe get less later. Hence, buy them off cheaply.

SkepticOne

trekkypj wrote: »

Just a hunch but I'd say they would tend to be litigious when their investment gets decimated.... words like fiduciary duty can be thrown out there and suddenly it's an unholy legal mess with a loooong wait for a solution.

Possibly but that would be between them and Eircom's directors.

bk

SkepticOne wrote: »

Possibly but that would be between them and Eircom's directors.

Yes, nothing to do with the Irish government and people.

We need to ignore Eircom completely and do what the Australian government is doing. Over the next 8 years they will be running fibre to 90% of homes in Australia, with 100mb BB guarantee. The government are creating a new company to do this, 51% owned by the government, 49% by private companies, basically most of the smaller telecom and fibre operators, who will be transferring their fibre assets to this new company, in exchange for access to a much wider FTTH network run carrier neutral and at cost price.

If they can do this across Australia, which is a bloody continent, we can certainly do it on a small island like Ireland.

crawler

Read this - draw parallels.

http://www.theaustralian.news.com.au/business/story/0,28124,25388843-5018020,00.html

Sponge Bob

An incumbent that can baffle and bamboozle stupid politicians and inept civil servants and incompetent regulators , how very odd ! It could not happen here.

This looks rather familiar ( they never got it ) , apropos rural areas

http://www.abc.net.au/7.30/content/2005/s1435814.htm

and then they reprised the idea 3 years later but this time apropos urban areas

http://www.theaustralian.news.com.au/story/0,,24709877-2702,00.html

In fact that second link from last November looks EXACTLY like something Rex Comb would have come up with for Eamon Ryan .

Meanwhile they confused the market all the time and strangled investment by other telcos in the uncertain morass they themselves created .

trekkypj

bk wrote: »

Yes, nothing to do with the Irish government and people.

We need to ignore Eircom completely and do what the Australian government is doing. Over the next 8 years they will be running fibre to 90% of homes in Australia, with 100mb BB guarantee. The government are creating a new company to do this, 51% owned by the government, 49% by private companies, basically most of the smaller telecom and fibre operators, who will be transferring their fibre assets to this new company, in exchange for access to a much wider FTTH network run carrier neutral and at cost price.

If they can do this across Australia, which is a bloody continent, we can certainly do it on a small island like Ireland.

Do you REALLY think this shower of wasters we have for a government are capable of any sort of progressive thinking in this regard? I bet half of them are secretly terrified of the internet.

I agree completely with what you are saying - I'm just pessimistic that it can happen.

SkepticOne

trekkypj wrote: »

Do you REALLY think this shower of wasters we have for a government are capable of any sort of progressive thinking in this regard? I bet half of them are secretly terrified of the internet.

I agree completely with what you are saying - I'm just pessimistic that it can happen.

"We've had to wait far too long already, that's why nationalisation is needed."

bk

SkepticOne wrote: »

"We've had to wait far too long already, that's why nationalisation is needed."

But even if Eircom was nationalised tomorrow, we wouldn't really gain much. I don't think the government would drop line rental costs and call charges, as they would need that to repay the 4 billion debt. At best they might drop LLU rates a little and open up the fibre more.

They would still need to spend billions more to roll out a Next Generation Network, so what would be the benefit?

SkepticOne

Personally I'm against nationalisation of Eircom in any form. Even without the 4bn debt it would still be used as a cash cow by the government and there would be a tendency to legislate against competition in order to preserve cash flow from the company. A lot of the problems stem from its period in national ownership and the problems that go with that.

thebman

We do need a semi-state owned infrastructure though. It should have to sell at cost with any profits going to improving network infrastructure rather than going to government budget deficits.

Keep them out as much as possible, we all know it won't happen though

SkepticOne

It would start out as being a network owned by the people for the people, but that would soon change. The old Telecom Éireann was supposed to be run for the benefit of the country but it did not work that way in reality.

bk

SkepticOne wrote: »

It would start out as being a network owned by the people for the people, but that would soon change. The old Telecom Éireann was supposed to be run for the benefit of the country but it did not work that way in reality.

That is why I don't want to see Eircom being nationalised.

However I do think a pure network infrastructure company that only owned fibre and didn't sell any products directly to end consumers, only to other telcos would be a good idea. If it didn't have any retail consumers, then I think it would tend to remain more focused on delivering good infrastructure and less likely to be abused by the government.

casey jones

Hoping that eircom goes bust shows how poor some people's understanding is of Ireland's telecommunications infrastructure. The other fixed line operators are completely dependent on eircom as in the main they wholesale services from them and none of them have the reach, or ever will have, of eircom's fixed line network.

If the company that operates the vast bulk of the core and access network as well being the third largest mobile provider went bust then the banking crisis would look like a blip. I wouldn't envy the IDA trying to deal with the existing multi nationals who depend on eircom or worse still, trying to attract foreign investment into Ireland against that backdrop. They do understand telecommunications and know that chaos would ensue were this to arise.

bk

casey jones wrote: »

Hoping that eircom goes bust shows how poor some people's understanding is of Ireland's telecommunications infrastructure.

Sorry, mate your the one who clearly doesn't understand either Irelands telco infrastructure or how bankruptcy works.

I'm and I guess most people reading this thread know a great deal about the Irish telco market and all about bitstream, llu, etc. Probably far more then you.

If Eircom goes bust, it doesn't mean everyones lines go dead. What it means is that Eircom would have to apply for bankruptcy protection from it's debtors, a liquidator would be appointed, whose job it would be to break up or sell the company as a going concern, making back some money for the debtors, but only a fraction of what they are owned. This would be the time for the Irish government to buy up the assets of Eircom for a vastly reduced price and with no debt.

Customers of Eircom shouldn't notice any major disturbance at this time, as the network fundamentally does have value, it just has too much debt.

Note that NTL in the UK went through much the same thing and their customers never noticed any change.

casey jones

This sounds great if we assume the network is a passive piece of kit that will work along just fine while all these changes take place. How long do you believe this process would take and who would operate and maintain the network while this is happening ? What is the risk of parts being sold off piecemeal? Quite high I would have thought as the banks would have no interest in what happens the network as a whole, just what they could get for bits of it. Apart from Meteor other elements cannot be seamlessly chopped off without massive damage.

Where do the staff fit into this mix, the network is more than the equipment, it is the knowledge, resources and processes behind it. Everyone's lines would not go dead, nor did I suggest they would, but the impact on service would become apparent very quickly if repairs and the type of configuration that is required to keep an incumbent's network going was to cease even for a short period of time.

I don't see the point in making a comparison with NTL UK as BT are the comparable incumbent. Have you an example of an incumbent going bust and everything working seamlessly as you seem to think would happen ?

watty

The network is worthless piecemeal. These are the parts that can be sold separately:
Meteor
Main network (voice/data atm/isdn/microwavebackhaul copper to home, exchanges)**
2.3GHz Rurtel, very under utilised. Should be BB with VOIP*
3.5GHz very very under used.*
Whatever masts they didn't sell already to Threefold
The Retail Operation
Some land/ buildings perhaps.


(*Anyone else would have lost these national licences already)

** Technically all backhaul fibre & microwave could be sold separately or taken over by eNet. This would be a good idea.

Everything will keep going including staff getting paid if it goes bust. It's the shareholders and those that have lent money that suffer.

Pretty much these should have been separated before privatisation and sold separately.

bk

casey jones wrote: »

Where do the staff fit into this mix, the network is more than the equipment, it is the knowledge, resources and processes behind it. Everyone's lines would not go dead, nor did I suggest they would, but the impact on service would become apparent very quickly if repairs and the type of configuration that is required to keep an incumbent's network going was to cease even for a short period of time.

Again, you clearly don't understand Eircom, the market or how bankruptcy works.

Eircom earns more then enough money to cover it's day to day operational costs (paying staff, maintaining lines, equipment, etc.).

The problem Eircom face is that they aren't making enough to cover both operational expenses AND service their debt and get new loans.

So if Eircom goes into bankruptcy protection, they are protected from the demands of their debtors, while they can continue to use their income (line rental, etc.) to fund their daily operational expenses. Staff would continue to get paid, lines maintained, etc.

It would then be up to a liquidator to sell Eircom and pay any proceeds from the sale of Eircom to Eircom debtors. More then likely a liquidator would sell Eircom as a going concern, maybe just separately selling Meteor if there was interest in it.

BTW the reason I mentioned NTL UK, was to point out how bankruptcy protection works with a large telco.

crawler

It is a real failing of Ireland that we don't have Chapter 11 - many telcos NTL, MCI etc etc all successfully went through the process and while it ends up bad for shareholders, it does ensure survival in many cases.

casey jones

bk wrote: »

Again, you clearly don't understand Eircom, the market or how bankruptcy works.

Eircom earns more then enough money to cover it's day to day operational costs (paying staff, maintaining lines, equipment, etc.).

The problem Eircom face is that they aren't making enough to cover both operational expenses AND service their debt and get new loans.

So if Eircom goes into bankruptcy protection, they are protected from the demands of their debtors, while they can continue to use their income (line rental, etc.) to fund their daily operational expenses. Staff would continue to get paid, lines maintained, etc.

It would then be up to a liquidator to sell Eircom and pay any proceeds from the sale of Eircom to Eircom debtors. More then likely a liquidator would sell Eircom as a going concern, maybe just separately selling Meteor if there was interest in it.

BTW the reason I mentioned NTL UK, was to point out how bankruptcy protection works with a large telco.

Well you seem to acknowledge that only Meteor can be separated out without massive damage but what if the network is broken up further, what if for example someone wants to buy the Dublin area network only along with the centralised maintenance and IT systems. What happens the rest ? Even if sold as a going concern if eircom with €3.9bn debt is worth €100m approx what is it worth without the debt and how will the state pick it up on the cheap as suggested. What happens to the eircom defined benefit pension fund ? Cue the ESOT rant but this is a serious issue as pre 1998 staff pay low PRSI and so are not entitled to dole or contributory old age pension. An employee's ESOT would cover a 3 year retirement.

All in all I believe this is an extremely risky strategy and I cannot find an example of the incumbent operator going through this anywhere else.

bealtine

casey jones wrote: »

All in all I believe this is an extremely risky strategy and I cannot find an example of the incumbent operator going through this anywhere else.

Well we could be a first in this area, watching the cherished ideologies fall through (mostly) incompetence on the part of the regulator.The "free market" can only work when it is allowed to work, this constant interfering with the mechanisms in a vain attempt to create an artificially priced system where competition can "flourish" has been shown to be an utter disaster area.

eircom will probably fail and while your points are valid, it seems to me that there is no other choice but to let it fail. Why should ,we the Irish people, pick up the tab for greedy venture capitalists and yet again bail out the shareholders of these companies? There was always a "health warning" on investments, sure nobody paid a blind bit of attention to it, but it was always there : "investments may fall as well as rise". Now they have fallen so tough.
You were warned.

Let it fail then nationalize it and take over the infrastructure and employ the best minds from eircom. All the problems solved...

So there were no examples before, we can lead the way on this one:)

bk

casey jones wrote: »

What happens to the eircom defined benefit pension fund ? Cue the ESOT rant but this is a serious issue as pre 1998 staff pay low PRSI and so are not entitled to dole or contributory old age pension. An employee's ESOT would cover a 3 year retirement.

This is pretty much the only valid point you have made so far. Yes the government would need to make some provision to support pre 1998 staff. It would still by far, far cheaper then buying Eircom now at 4 billion plus.

All your other points are pretty irrelevant. If some one sees value in just the Dublin net and offers enough, let them at it, the government need only pick up the rest of the network then. Realistically in the current economic reality, few companies have the money to buy anything and would be unlikely to outbid the Irish government if they wanted it.

I get the feeling that you are an Eircom employee, desperately hoping that the government will save you. Sorry but I've little sympathy for you.

BTW without the debt, I'm guessing Eircom would be worth between 1 and 2 billion.

Headshot

bk

love your work

your a visionary:)

watty

The network would not be sold piecemeal. It's not technically simple.

The liquidator would at most break it down to these parts really:
1) Meteor worth 900M to 1.2Billion

2) Main network (voice/data atm/isdn/microwavebackhaul copper to home, exchanges) +
2.3GHz Rurtel, very under utilised. Should be BB with VOIP + 3.5GHz very very under used. + Whatever masts they didn't sell already to Threefold

3) Tetra

4) The Retail Operation + PhoneWatch

The land / buildings divided among the 3 non-tetra parts.

The most it could be divided (and it wouldn't be)
a) Meteor
b) Main network (voice/data atm/isdn/microwavebackhaul copper to home, exchanges)*
c) 2.3GHz Rurtel, very under utilised. Should be BB with VOIP
d) 3.5GHz very very under used.
e) Tetra
f) Whatever masts they didn't sell already to Threefold left with the various bits
g) The Retail Operation
h) Phone watch
i) Some land/ buildings perhaps that could be surplus.

I forgot about Tetra & Phonewatch before.

* Too much of the backhaul is not NGN, too much is ATM/ISDN etc to justify separating the backhaul from exchanges and local loop.