Eircom issues debt warning as revenues continue to decline

TiGeR KiNgS

Eircom yesterday warned that it could breach the covenants (conditions on debt issued by a lender) of its €3.8 billion net debt within the next 12 to 18 months as the company’s revenues continue to shrink.

Eircom: ''A covenant breach would be some time down the road. We have plenty of room to manage that. :rolleyes: ”

Looks like a ropey time for Eircom ahead (and its employees . )

http://www.irishtimes.com/newspaper/finance/2010/0901/1224277972121.html

grizzly

Did they have it coming? Sitting on their position of market leader and not innovating enough.

grizzly

What's a "covenant breach" in this context?

Ranicand

This is bad news for everyone.

Sure we have UPC but they are cable.

It's a bit like transport pretend cable is rail and DSL is the roads.

Who will manage the DSL network if Eircom goes under?

watty

eircom isn't going under. The new owners want to get rid of some of the Debts. Read what they did buying Global Crossing.

Oracle

There's another angle to this .... they've spent all that money and they're still terrible! What did they spend all the money on? It certainly wasn't upgrading the network or improving service.

zenno

eircon are finished. they have ripped off customers for so long now the devil is at the door to take them down, and about time. goodbye eircon.

jor el

Ranicand wrote: »

It's a bit like transport pretend cable is rail and DSL is the roads.

More like DSL is the roads, and cable is the motorways. They're faster, better, run smoother, more modern, and are the way forward.

Ranicand wrote: »

Who will manage the DSL network if Eircom goes under?

eircom aren't going anywhere. Even if it were to become non-viable, an examiner would most likely be appointed, and the usable components of the business sold off, while a lot of the debt could be written off. Nothing would change from the customer's point of view, bar there would be another new owner. There have been so many owners of eircom at this stage, it's doubtful that anyone would even notice.

Getting rid of a lot of the debt that eircom is saddled with would be a positive thing.

Solair

Oracle wrote: »

There's another angle to this .... they've spent all that money and they're still terrible! What did they spend all the money on? It certainly wasn't upgrading the network or improving service.

From what I gather they basically took huge debts run up by their previous owners onto their books. They didn't spend much money investing into their infrastructure.

It looks as if eircom has debt run up buying eircom!!

watty

The previous owners borrowed money to buy control of eircom then transferred that Debt to eircom. None made a net investement at all. They used current revenue profits to service the Debt. That's a simplified explination. Assets (such as Eircell) stripped at start. Last asset stripped was Eircom masts sold to Threefold and in many cases leased back. Neither act makes sense if you want to build a telco and make money from profits in long term.

More pair gains (carriers) added after privatisation instead of lines. Now they don't need them as the lines have fallen from 82% to about 60% due to highest in world line rental (to service Debt that was almost €5Billion at one stage including Pension, Bonds and NIK commitments).

STT (owned ultimately by Singapore Government) will concentrate on efficiency, cutting costs and management layers and making as much debts, NIK and Bonds as worthless as possible before investing. Hence all the dire warnings. It's to drive down value and make redeeming the company cheaper.

lucernarian

Two points I'd like to raise:

The proportion of people using phone lines would vary widely around Ireland and is certainly influenced by presence of good mobile phone coverage at a minimum and especially if UPC's triple play services are in the area. The areas which are dropping phone lines like hotcakes are likely served by good alternatives.

The poor bogger who is dependent on eircom for all electronic communications needs (especially if poor GSM coverage) will still be using the phone line, along with many of his neighbours probably and will be mainly stuck on pairgains for a while to come. So landline penetration reductions won't benefit so much the people who need to be off pairgains the most. It's still a serious issue in many parts of Ireland.

Also, UPC are not relevant to this discussion one way or another as in no way do they have anything like the coverage of eircom even if they hypothetically wound up bust. Which isn't likely. UPC wouldn't come close to meeting even the poorly enforced USO licence eircom has, much in the same way as there will never be a road network consisting exclusively of motorways.

Sponge Bob

They booked a pension surplus by rebasing their future liability off the pay after pay cuts , they did not say whether this future cut in pensions will be enforced on current pensioners.

They also intend to do a few tricks like regrade down existing staff ( by paying them a large lump sum ) where they only have a few staff at that level nowadays but a lot of pensioners who retired at that grade. This will require that they hold onto a few 'strategic' staff at certain key grades for that purpose.

The union is bought off by pension contributions to the ESOT pension scheme ....so there won't be a peep out of the CWU about it.

While that keeps the pension scheme 'solvent' in accounting terms it does nothing much for their bond liabilities or their long term pension liabilities beyond 2020 but they can come back to that post default or as part of a default.

The first re-fis are due late 2013 early 2014 and the inevitable default could be as late as 2012 like they said this week.

From now on it is about managing expectations, downwards.

ldwdub

Exactly SpongeBob, for STT the goals are to attempt a downsize (or rightsize as they would call it) of the company, manage market expectations and try and leverage Govt support for wide-scale deployment of FTTC/FTTH.

Whether or not the CWU are bought, will pan out in the course of the coming year when the company tries to address the large numbers field force currently twiddling their thumbs.

Sponge Bob

ldwdub wrote: »

year when the company tries to address the large numbers field force currently twiddling their thumbs.

I take it these are the Field Engineers and Non NGN Core Network engineers , how many of them are currently 'twiddling' in there???

Is the entire copper maintenance contracted out to KN now or are there some inhouse 'staff' engineers still out working in the vans ??

I even saw a KN supervisor wearing a UPC Hi Vis while supervising/helping his lads this week

ldwdub

Yeah, the majority of these guys would be copper-centric...so dealing with faults, new installs etc....and as can be seen from the results...this market is dead. Its difficult to ascertain numbers exactly, just what I hear back from various sources. It doesnt help that in certain cases the internal cost of some maintenance (incl subsistence and overtime) is more than the cost of contracting it out...to KPN for instance.

Sponge Bob

eircom are not that interested in the ( maybe) 1,500 field grades still on their books.

They are much more interested in the 5,000-7,000 they got rid of (mainly) in the 1980s . These are Field/Technical grades from the days of the P7T and the 4 man standard truckroll and their manual switchboard telephonists and which demographic are about to start sucking diesel out of the pension fund over the next 10 years.

Sponge Bob

http://www.irishtimes.com/newspaper/finance/2010/0903/1224278126596.html

The Headcount ( excluding agency) is around 6,000 now down by 400 in the past year ( that was in the annual report)

80% are on civil service contracts meaning they were hired pre 1984

The average age of staff is 51

Only 4-500 staff are aged under 40.

700 of the 6,000 are based in Donegal

Importantly almost none of them maintain the network, contracted out to KN and none of them do ccustomer service, contracted out in Dublin or sales which is contracted out too.

java

ldwdub/Sponge Bob

How do you know these things? Do ye work for eircom?

whiterebel

Does anyone actually WORK for Eircom?:)