The Sale of Eircom

Elmo

Just a quick question if anyone knows or knows where I can find out.

How much did the government get for Eircom and also how much has the Government invested into Broadband infrastructure since its IPO?

Sorry mods for bring this up again.

RangeR

This may be of interest.

Interesting read on the whole debacle. The initial privatisation was the single worse thing to happen to eircom, ever.

Elmo

RangeR wrote: »

The initial privatisation was the single worse thing to happen to eircom, ever.

You mean the complete privatisation. It doesn't tell me how much the government raised on the sale.

RangeR

It came up on the radio today. I was only half listening. However I believe the Irish Gov got less than €500 million for their shares. Probably less than €300. However, I was only half listening so that's probably not spot on.

What I do remember, is that they said that eircom was debt free before the sale.

If it helps, it was on Newstalk's breakfast show between 8am and 9am. I'm sure they have a podcast about it. They went into some details for about 3 or 4 minutes.

RangeR

Elmo wrote: »

You mean the complete privatisation. It doesn't tell me how much the government raised on the sale.

And no. I mean the initial. Everything went downhill from there. Each company that purchased the company loaded it with their debt.

Stinicker

RangeR wrote: »

This may be of interest.

Interesting read on the whole debacle. The initial privatisation was the single worse thing to happen to eircom, ever.

To be honest I don't think so, the worst thing that happened to Eircom was its sale to vulture capitalists like Tony O'Reilly and Babcock and Brown who asset stripped, leveraged to the last, and cosied up to the unions.

Ok, Privatising was a bad idea because of how it turned out, however if Eircom had been told sold to BT for example it would be run as a Communications Company and investments made in the company and network, instead it was treated with contempt and used as a pawn in the gambling game played by investors and "investment banks" Babcock and Brown have since been liquidated and the bankers lined their pockets, creamed the profits and broke the company.

If we had a proper Telecommunications regulation and Banking Regulation in Ireland this would not have been allowed to happen, and it might have been ran as a Telecoms company and not the monster it became.

Tony O'Reilly (CEO of Fianna Fail's Propaganda Machine) took control and it was clear he could do what he wanted given the levels of connection and influence he and Fianna Fail had. Nothing would be question and the staff were happy because of the ESOP and continuous payouts and pay raises. He was seen a better bet than Denis O'Brien who was tainted goods after the Lowry affair and him setting up ESAT and challenging Telecom Eireann's natural monopoly.

Thus Eircom and Ireland's comms network was doomed due to asset stripping, corrupt politicians, Fianna Fail and a regulation system that existed as a glorified social employment scheme and place to to shovel Fianna Fail gombeens into because they couldn't survive 2 minutes in a private sector job. If O'Brien took control back in 2001 Eircom and Irish broadband would be in alot better position today.

It shows how FF destroyed something so good and now the same will happen to any assets that the EU/IMF force to be sold. The connected elite will cream everything and the whole thing will become a farce. Ireland is without a shadow of a doubt one of the most corrupt countries on Earth, just because you don't encounter Immigration officers asking for bribes etc. our corruption is hidden and this is the worst type, all elements of Irish business from the very top down SME level is corrupt to the core and that old adage of its not what you know but who you know is so very true here.

Elmo

I don't believe BT or Denis O'Brien would have been any better. TBH. but that is OTT, so without all the political speak. How much did the State get and how much have the state spent since privatization?

clohamon

1999 Annual Report of the Comptroller and Auditor General page 82-85

http://debates.oireachtas.ie/ACC/2000/12/07/00003.asp

Mr. Purcell: *As you said, Chairman, there is just one paragraph, No. 33, to deal with. It is an information paragraph rather than any criticism because it records the financial arrangements involved in the State divesting itself of the ownership of Telecom Éireann. The process started in earnest in 1996 when 20% of the company’s shares were sold as part of a strategic alliance. It ended in 1999 with the flotation of almost 50% of the shares by way of public offering. In between, an additional 15% was acquired by the strategic partner. The remaining 14.9% was transferred to staff in return for cash and other considerations. In summary, over £1.5 billion was received from the strategic partner while £3.3 billion was realised from the flotation. A further £190 million was received on foot of the share allocation staff, of which £100 million was met by Telecom itself. Therefore, the total Exchequer proceeds were over £5 billion. The cost of the flotation was almost £77 million and a breakdown of those costs is contained within the paragraph on page 85.
Another outflow of the £800 million paid into a trust fund to meet the State’s liability for pension costs is associated with former staff of the Department of Posts and Telegraphs. My staff examined the arrangements for the disposal of the State’s shareholding and, as a result of their work, I am satisfied that proper procedures were in place and implemented throughout the process, and that the proceeds represent good value for the Exchequer

.

The only broadband programs I can remember are:-

GBS €7M?
NBS €49M
RBS €4M?
MANS €176M
Schools ?
Exemplar Networks €10M

lucernarian

Oh I'd forgotten to reply to this thread.. The McCarthy report cites a total value of €6,300 million euro. http://www.rte.ie/news/2011/0420/mccarthyreport.pdf

That's probably just the "over £5 billion" figure from the oireachtas excerpt converted into euro.

clohamon

Section 2.8 on page 10 of the McCarthy report is perfect example of how oily language can help you slide past unpleasant realities. Nearly every sentence contains some kind of slippery dodge.

In short, the pitch goes like this.

• The sale of Telecom Eireann brought in a mountain of cash.
• If there were other damaging consequences, they are exaggerated, they are unimportant and are nobody's fault.
• It was a temporary situation and things are much better now.
• If there were lessons to learn, we've learnt them, so let's not blame privatisation.

The full version below.

2.8 Sale of Telecom Éireann/eircom
The state’s disposal of Telecom Éireann, which became eircom, remains the largest privatisation undertaken in Ireland to date. From a revenue-raising perspective it was very successful, raising approximately €6.3 billion of the approximately €8.3 billion raised in total for all privatisations. It also stands out as an example of the public policy challenges that arise when the state divests control of a utility with a significant role in a major sector of the economy.
It has been argued that in selling eircom the government ceded control of an important instrument by which it could have directly influenced investment in telecom infrastructure and broadband roll-out. Total capital investment in telecommunications technology fell from €500 million in 2002 to €209 million in 2005. The state had to invest substantial sums itself in telecoms infrastructure with mixed results.2 Broadband roll-out was below par to the detriment of the economy, it is claimed. Recent research suggests, however, that this latter claim is overstated. In the United States, where internet coverage has varied geographically, there is no clear evidence that rural areas with high-quality provision do systematically better than areas which attracted lower levels of provision (Forman, Goldfarb and Greenstein (2011)).
The experience in other EU countries had shown a strong correlation between broadband take-up and adoption of Local Loop Unbundling (LLU) and/or cross-platform competition from cable operators. Much earlier LLU in Ireland would have enabled other operators to offer innovative new products and potentially make their products available in locations not served by eircom. This was an important factor distinct from the state/private ownership issue. EU regulation had mandated LLU be adopted by all member states by 2001. Eircom was, however, only nominally compliant – in practice LLU was too expensive and too administratively complex to interest other operators. Again, ComReg’s ability to facilitate LLU was limited in part by legal and statutory deficiencies. In any case, the regulatory problems in respect of broadband appear to have now been overtaken in part by technological advances: eircom’s network has been bypassed in many areas by cable and mobile operators.
Although it is generally accepted that there was a period in which infrastructure and availability of broadband was below what was desirable, the extent to which this resulted from control of eircom switching to the private sector is open to debate. The majority of those states that currently out-rank Ireland in international comparative exercises on broadband penetration and speed also privatised their incumbents in the telecoms market, in some cases earlier than Ireland did, and these private entities delivered the necessary infrastructure investment.The issue of regulation must, nevertheless, be at the forefront of decision-making on the sale of key assets so as to ensure that, inter alia, any immediate financial gains to the Exchequer are not undone by medium to long-term underinvestment in important infrastructure. The regulator must have the competence and enforcement powers necessary to intervene effectively in the event of market failure, in particular to ensure it has the capacity to impose penalties for non-compliance and has strong competition powers.