Eircom accepts it needs to do more

Sarsfield

Eircom announced profits of €52m this morning.

Voice traffic down 11% since last year. 140,000 bb customers.

"The company says it now has more than 140,000 broadband customers. Dr Nolan said the company would need to do more to cut prices than previously thought in order to reach its target of 500,000 users by December 2007"

And most interestingly:

"Eircom shares were eight cent lower at €1.83 in Dublin this morning as some analysts expressed disappointment at the broadband figures"

Eircom might be happy to ignore Government and customers, but investors must be listened to!

http://www.rte.ie/business/2005/0527/eircom.html

Romer

Might also help if they roll out to rural areas..

viking

http://investorrelations.eircom.ie/news/rns_44.htm

The investment in [broadband] customer acquisition will require greater price stimulation than previously assumed, and we are committed to further innovation in product, pricing and promotions to deliver our stated goal to achieve 500,000 users by December 2007.

IOFFL has been shouting about this for a long time. :rolleyes:

No announcement of Meteor purchase, obviously Meteor are being "commercially sensible" as to the price they sell themselves for. Playing the "eircom game"...

Blaster99

At least they're talking the talk.

viking

Blaster99 wrote:

At least they're talking the talk.

They're experts at that!

damien

If we have 140,000 dsl customers now plus the 1800ish LLU customers then it means their 500,000 figure will not be met for 7 or so years with the calculated takeup rates.

We're hearing unofficial figures of 650 bitstream signups a week currently. This is before the summer lull or maybe the lull is earlier this year.

Will eircom push even more for Government funding and intervention now?

Mr_Man

As someone mentioned in another thread Eircom are having to put some serious resources into acquiring new bradoabdn customers now that the low hanging fuit is picked. Their 'Amber' project is due to start to-day, and maybe some day they'll get around to replacing the crap copper that serves many parts of their network.

If they don't get serious about the need to improve and maintain the network they will find themselves being eaten alive, by the LLU process on one side and the wireless players on the other. To complete the misery all that would be needed would be O2 or Vodaphone to enter the broadband market.

M.

Cryos

Well the Amber project still dosnt get me broadband

bk

Mr_Man wrote:

If they don't get serious about the need to improve and maintain the network they will find themselves being eaten alive, by the LLU process on one side and the wireless players on the other.

You forgot to mention NTL (UPC), they seem to be getting much more agressive with their BB rollout recently. This is the company Eircom are really worried about. NTL can offer the triple play (BB, Phone and TV) to a large number of potential Eircom customers. I expect NTL to be close to covering all their cable customers in Dublin, Galway and Waterford by the end of the year and that they will start heavily advertsing BB then.

I have always said that €40 for entry level BB is just too expensive for most people, after all Sky and NTL digital only costs about €30 and many would argue (not me) that this offers far better entertainment for your money.

A few months ago when Eircom said that increasing the entry level speed to 1m from 512k would boost uptake, I thought they were crazy, the people who haven't already gotten BB are the mainstream customers who couldn't care less or even understand what these speeds mean, they only care about the price.

Many family and friends obviously ask me about BB when they are interested in getting it, when I tell them Eircom costs €40 most of them say forget it, that is too expensive, however for those who I find can get NTL BB, they are delighted to hear that it costs only €25 (for 1m) and 100% of them have gotten it and are very happy.

€25 seems to be the sweat spot for mainstream users. I predict Eircom will need to drop their prices to this level to increase uptake.

paulm17781

When I had surf no limits I remember telling people it cost £20 (I think that was the price) for all the calls. My non-techie friends often said "That's a rip off, I pat 1p per minute. If at the time that seemed too much for a good value product of course €40 would seem so.

SkepticOne

Yes, there's NTL, LLU and the wireless companies entering into competition with Eircom nowadays. When Eircom says it needs to do more they are not worried about "targets" which have no consequences for Eircom if they fail to meet them (and can be dealt with through further spin if necessary).

The purpose of Eircoms line "we need to do more" is aimed at giving the impression that Eircom really really wants to provide broadband to the good people of Ireland.

They don't want to give the impression that they are simply worried about business being taken away from them like any other company out to make money. If they gave this impression then everyone would then realise that Eircom only respond to competitive pressure (which is the reality). If people were to realise that then the focus would shift to looking at ways that competition could be enhanced and this would not suit Eircom one bit.

Instead, it is much better to have people believe that Eircom respond to moral pressure to achieve targets and such. Moral pressure is the best sort of pressure for Eircom since it means nothing.

Mr_Man

The following are from Phil's results presentation this morning:

Eircom spent €14m in the form of discounts to acquire broadband customers in the past year (they acquired around 100k customers in that period).

They lost around 100k customers from their voice business.

They plan to upgrade an additional 200 rural exchanges by March 2006

They hold around 77% of the retail broadband market

Churn is a big problem for them in the broadband trials, interstingly many people who had a trial went back to dialup and flat rate access.

Further product and price initiatives are under development and will be launched in July.

Broadband is a key future revenue area for this company, and they are finally getting the message about how important it is to their survival. They are facing fierce competition as noted above and at the same time they are losing voice traffic big time. This will increase as more people opt not to get fixed lines, and as VoIP becomes more prevelant.

M.

paulm17781

I wonder if they will see the sense to lower line rental? What with people going to NTL/IBB and getting VOIP. Lowering line rental would probably help reduce this.

Cryos

One company that seems to have really got their act together with telecoms is yahoo! The next version of their messenger provides free calls between their members !

SkepticOne

Where there is competition Eircom will respond. I don't believe there's ever been an issue with this. The problem has been that this competition has not been forthcoming until recently and is still extremely limited.

With due respect to Mr_Man, I don't think this is a message that Eircom have ever needed to get. I think they've always been aware of the possibility of competitive pressure; they have just had very little of it (still the case) and so there's little need to do much.

On they occasions when they do meet competition they can be quite quick and comprehensive, for example: the increase in speeds following Smart's product announcement. This is one of the clearer examples but there are others.

Eircom will never acknowledge this, of course. What they would much rather do is engage in a war of words with DCMNR, IOFFL and so forth. Eircom getting a bashing from Dempsey has no financial consequences if people have nowhere else to take their business.

The big question is what do we want. Do we want the competition or do we want Eircom to succesfully deal with the competition? It seems to me that there's quite a lot of people who deep down want Eircom to make such moves as to succesfully drive out competition ideally in ways that benefit the consumer in the short term. I think that the underlying belief behind this desire is that Eircom is basically a decent company with the interests of the people of Ireland at heart. My view is that concepts of decency are meaningless in the context of Eircom. It is not that Eircom are "bad" but rather that the issue of good or bad simply does not enter into the equation with regards to how Eircom operate and their purpose.

We need, therefore, to move away from the idea of trying to manipulate Eircom and move instead to looking at things from the point of view of the individual consumer and community and the choices available to them.

Solair

That is truely pathetic performance.

Ireland should be one of the most internet-friendly markets you could possibly be operating in.

It's English speaking, it's rolling in money, it has one of the youngest most IT savvy populations in Europe.

I mean, you'd think eircom should be rolling in revenue from broadband uptake?

It looks like they're suffering the consequences of their own failure to embrace and roll out the technology. They took a short term view that they could sweat the assets, extract as much revenue as possible from existing dial up technologies and didn't launch DSL in time.

Meanwhile, the voice market has been pretty compeditive and the cost of calls has dropped enormously. Obviously a lot of businesses and residential customers with large phone bills have migrated to other carriers. This trend will only increase. Mobile call prices will inevitably drop when 3 and the virtual mobile operators come into the market so you'll see lots of people drop their landline connections completely.

Eircom's revenues from voice and PSTN/ISDN traffic will drop meteorically. This isn't a potential scenario, this WILL happen. There's no question about it.

They haven't bothered to look at the longterm view, that they could have been a major broadband and interactive service player and have instead decided to stick with their old-fashioned telephone company business model and have tried to prevent change rather than embracing it.

If they don't do something to turn it around very fast they may find themselves in dire financial circumstances and either folding or being bought out at a very cheap price by one of the bigger players in the market.

I'd say looking at that performance, Meteor's likely to be far too expensive for them! It's actually a sucessful player in the telco market with potential while Eircom's old, stagnent and lacking imagination.

I'm not trying to bash eircom, I just think it would be a terrible pity to see a company that has played such a vital role in the Irish economy to be so mismanaged that it disappears. A large indigenous telecoms operator is still quite important for an island nation like Ireland.

They're a company that did innovate enormously in the 1980s by rushing through the adoption of digital technologies that gave us one of the best telecommuniation networks in the world. Unfortunately, the current management seems to have been more interested in extracting as much profit as possible. They inherited a network from Telecom Eireann that was in extremely good shape and they've let it fall apart. Decades of tax payers money was flushed down the toilet while the investors lined their pockets.

It's a national scandal.

If anyone out there reading these boards does have an investment in Eircom PLC, I'd suggest that you kick up a huge stink at the next AGM and call for new management.

The eircom unions might consider making some noise via their shareholding too. The company's going to go down the pan the way it's going!

bk

Solair wrote:

I'm not trying to bash eircom.

Well you are doing a great job of it

Eircom are coming under assualt from almost every direction.

Many people are giving up their phone line in favour of a mobile phone because the line rental is so high.

Those who continue to have a telephone lines are moving to cheaper operators like UTV for their call charges.

Eircom can only stop this slide by pushing BB in a big way. I think that the only reason most people haven't dumped their phone line already is because you need a phone line for the internet. Eircom badly needs to get more people onto BB in order to stop them from moving to the mobile companies.

Of course with BB, Eircom are also coming under increased pressure from NTL and IBB. These are such a big threat to Eircom because not only will Eircom lose BB customers to them, these people can then drop theit phone lines for either mobiles or VoIP, therefore Eircom also loses line rental and call charges.

Things are looking very grim for Eircom.

SkepticOne

bk wrote:

Things are looking very grim for Eircom.

Is that a good thing or a bad thing for us, the consumer?

SkepticOne

Solair wrote:

I'm not trying to bash eircom, I just think it would be a terrible pity to see a company that has played such a vital role in the Irish economy to be so mismanaged that it disappears. A large indigenous telecoms operator is still quite important for an island nation like Ireland.

The main problem for the consumer is that Eircom is still a huge player in the market. It is good that they are beginning to lose customers as this means that more competition is entering. Competition is still nowhere near the levels we see in Japan, South Korea, Sweden and many if not most of the country is still monopolised by Eircom.

What you regard as a national scandal, I regard as a necessary phase. The ideal scenario for Ireland would be that Eircom would be one player among many although we are a long way from that.

Eircom (or some company running the legacy telephone infrastructure) will always exist. There will always be some money to be made from the fact that the wires go into almost all homes in the country.

damien

bk wrote:

Of course with BB, Eircom are also coming under increased pressure from NTL and IBB.

eircom have 140,000 bistream connections. 100,000 are with eircom.net and 40.000 are with the other providers. Each of those 140,000 pay a massive line rental.

IBB and NTL have about what 7000 customers between them? Not a threat just yet and probably won't be for some time. 500,000 people have now left eircom for voice and used another carrier but eircom still get the line rental for them. With the way they've gotten line rental increases they can probably still lose a lot more customers for voice. NTL ditched voice too remember?

It will only be when eircom start losing 10s of 1000s or 100s of 1000s of line rental customers that they'll sit up and take notice. LLU will do this more than wireless because VOIP is another 3+ years before it matures*. Trouble is eircom have done great (non illegal) things to make sure that LLU will remain unusable for the next 5 years.

I wouldn't think they'll be worried for another while and by then Uncle Phil and Uncle Davey will have retired.

* though it may mature faster now that the FCC has told the operators they have to connect support calls to emergency services.

SkepticOne

Solair wrote:

They're a company that did innovate enormously in the 1980s by rushing through the adoption of digital technologies that gave us one of the best telecommuniation networks in the world. Unfortunately, the current management seems to have been more interested in extracting as much profit as possible.

My impression is that Telecom Eireann, by themselves, did not innovate. The little innovation that occured was from government and the network itself was only advanced because Ireland skipped a generation of telco equipment due to chronic lack of investment prior to the digital upgrade. I agree that for a moment in time Ireland did have an advanced telco system but I think it was overhyped in the years thereafter in an effort to attract foreign investment. I remember coming back to Ireland after a number of years abroad and being told in 1997 that we had a very advanced communications system and thinking "wha?". The range of services available to businesses and consumers was no better than that of any other country.

jwt

I've been saying for the last year that eircom is going to be squashed between bb /voip and mobile. Each year the dividend will be squeezed, each year the revenue streams will shrink. If I was a major investor I'd be asking why eircom don't grab the bb customers immediately, enable all the exchanges , fork out for the upgrades knowing full well that the typical irish customer once snared is usually reluctant to change.

They could at the stroke of a pen solve the bb problem, guarantee their revenue stream for the foreseeable future and position themselves nicely for a sell off.

But it all hinges on the cost of the network upgrade/repair. Which makes me wonder is the network is in worse condition than anyone thinks.


John

Solair

The network can't be in that bad a state of repair. OK, I know we're hearing a few horror stories on here about line problems, particularly in rural areas, but I feel they're not the norm.

If you think about it logically the local loop infrastructure in Ireland is, for the most part, relatively new. Telecom Eireann did invest signfigant cash in local loop upgrading in the 1980s as there wasn't much of a network there to build upon.

By the late 1970s P&T was in crisis, the telephone network was utterly pathetic

Dublin, Cork and the major cities and some towns were connected to relatively modern (for 1970s) electromechanical crossbar exchanges while rural areas were for the most part still switched by manual operator centres.

All of that old stuff was ripped out and replaced during the 1980s, in most rural areas the infrastructure that was put in only dates from the early to mid 1980s as there was either nothing there to begin with or the infrastructure, including the copper wires, wouldn't have been reusable when things moved to digital.

---

The issue may be that Telecom Eireann used 1980s multiplexing technologies (pair gain) rather extensively as they were under pressure to roll out a network as fast as possible within a fairly tight budget.

Their priority was to get voice quality lines and digital switching in place as soon as possible and pair gain technologies were perfectly reasonable sollutions to help speed things up.

DSL hadn't yet been invented and ISDN was years off and the fastest modems ran at 9600bps.

---

There's also a large number of very very small exchanges in rural areas which are really not much bigger than an office PABX. Eircom may not have been too keen on spending money on DSLAMs that would only ever serve a few lines. (the technology's now far cheaper though)

The reason for this is simple: The very scattered populations in rural areas in Ireland and the fact that Telecom eireann often installed digital switches completely from scratch so didn't have to follow the old-style network topologies that would have used larger more centralised switches.

---

It'd be interesting to see if there's a publically available Telecom eireann report on the state of the network circa the mid 1990s

damien

Solair wrote:

It'd be interesting to see if there's a publically available Telecom eireann report on the state of the network circa the mid 1990s

How about 2004?

http://archives.tcm.ie/businesspost/2004/03/14/story503278853.asp

SkepticOne

jwt wrote:

I've been saying for the last year that eircom is going to be squashed between bb /voip and mobile. Each year the dividend will be squeezed, each year the revenue streams will shrink. If I was a major investor I'd be asking why eircom don't grab the bb customers immediately, enable all the exchanges , fork out for the upgrades knowing full well that the typical irish customer once snared is usually reluctant to change.

They could at the stroke of a pen solve the bb problem, guarantee their revenue stream for the foreseeable future and position themselves nicely for a sell off.

I think the big problem for Eircom is competition in the cities and this is still at an early stage. Eircom need to concentrate on those areas first. The rural areas can wait as there is still relatively little competition in those areas and Eircom can make good money off ISDN and dial-up for years to come. Tbh, I'm surprised the amount of upgrading they actually have done.

But it all hinges on the cost of the network upgrade/repair. Which makes me wonder is the network is in worse condition than anyone thinks.

As Solair says there were a lot of pair gains installed in rural areas. Eircom have said that it would cost 2 billion to remove them. Not that anyone believes this (except perhaps ComReg) but there you go. I think Sponge Bob has said that that some exchanges have 70% pair gained lines. There is also the fact that when consumers move to broadband, Eircom lose the revenue they used to make from dial-up and ISDN which can be significant in the case of businesses.

My prediction is that Eircom will start trying to qualify people that they had previously failed in areas where proper competition is appearing: cable, wireless, LLU. I think this 'amber programme' is Eircom's way of letting people know that they might now qualify. I think cable is a particular threat as they market heavily in areas that they upgrade.

As for rural areas, I think the government has dropped the ball on the need for competition in rural areas sadly. This contract for broadband for TDs will probably go to Eircom.

Sponge Bob

Solair wrote:

The issue may be that Telecom Eireann used 1980s multiplexing technologies (pair gain) rather extensively as they were under pressure to roll out a network as fast as possible within a fairly tight budget.

Pairgains , an 80s technology as you put it, were only deployed by Eircom on a significant scale from 1995 onwards.

There's also a large number of very very small exchanges in rural areas which are really not much bigger than an office PABX. Eircom may not have been too keen on spending money on DSLAMs that would only ever serve a few lines. (the technology's now far cheaper though)

Small 'remote 'dsl' concentrators are about €150 a port nowadays . Some can be strung off a pole over 5km from an exchange and still provide ADSL2 up to 4 km further out. They would do the same if superglued to the wall of a small exchange.....being about 50cm Cubed.

They reverse PAIRGAIN the data back to the exchange (or whereever the heavy DSL kit is) and also pick up power over copper (POE in effect) , using 4 bonded pairs for the lot.

Solair

I don't think the copper plant can possibly be as bad as they're making out though.

Just for example, when I run the DSL line diagnoistics on a couple of Zyxel modems (BT Ireland) in the cork area they come up as exceptionally good lines. Very good signal to noise ratios etc far exceeding the requirements for DSL.

I wonder if eircom simply set the bar as high as possible and failed as many as possible so that they would avoid any kind of tech support and would keep the technology limited to urban areas?

Sponge Bob

Solair wrote:

I don't think the copper plant can possibly be as bad as they're making out though.

Just for example, when I run the DSL line diagnoistics on a couple of Zyxel modems (BT Ireland) in the cork area they come up as exceptionally good lines. Very good signal to noise ratios etc far exceeding the requirements for DSL.

Probably underground lines and probably near an engineering depot.

Once you go 5 miles out of Cork you have a single engineer (average age late 40s) , overground lines in his area and installation targets set for urban areas, a big mistake that. You may have noticed a spanking new fleet of tranny vans with cherry pickers on the roof. These are being deployed out to these ageing (typically 45-50 year old) engineers in rural areas as they are rightly getting fed up of hoisting ladders hither and thither at their age . When did you last see an Eircom engineer under 40 ?

He has no time anyway to trace pairs, given an average 2-3 mile rural line, where 2 engineers may go out in Cork city to trace a 1 mile pair .

Therefore he whacks in a pairgain to meet his installation target.

This goes back to the field engineer cull conducted by Eircom in the early 1990s where they got rid of more than they should have and retained a giant rump of ex manual switchboard operators who sat in offices doing bugger all , fondly known as Biddy in these parts. Biddy has been culled now she got her shares and has been replaced by that voice recognition thing in the past 6 months, a creation that is no less useful than Biddy ever was and which also leaves you on hold until it cuts you off in the end.

Widespread and indiscriminate Pairgain use , whereby 120v is steadily whacked down a 24awg copper pair designed for 48v, degrades the copper itself and the insulation around it and causes water ingress within its design life......even if it is only 20 years old as you correctly noted.

I wonder if eircom simply set the bar as high as possible and failed as many as possible so that they would avoid any kind of tech support and would keep the technology limited to urban areas?

Partly, they also fear crosstalk on bundles interfering with an old cash cow of theirs, Phonewatch. They particularly fear being sued for introducing crosstalk ...in effect...and houses being burgled with no notification.

Of course Phonewatch would be a perfect application to port to GSM had eircom not sold the damn thing off to Vodafone ......so they are stuck !

Then there was the asset sweating period starting in 2001 when the rest of the world installed BB but Eircom were busy paying off O Really and Soros and their New York mates.

bk

SkepticOne wrote:

bk wrote:

Things are looking very grim for Eircom.

Is that a good thing or a bad thing for us, the consumer?

As long as it doesn't go too far, it is good for the consumer.

Of course if Eircom goes out of business (very unlikely) that would be very bad. But if they just come under greater competition and have to compete agressively that is obviously ideal for the consumer.

damien.m wrote:

IBB and NTL have about what 7000 customers between them? Not a threat just yet and probably won't be for some time.

Yes, while not much at the moment, I think when we see the uptake figures at the end of the year, things will have greatly improved.

Just look at the Broadband forum, there are now lots of NTL threads. NTL have certainly expanded outside their initial Tallaght area and now seem to be in a lot of areas across Dublin (D9, D18, D15, D2, etc.) and are now also expanding across Galway and Waterford.

As you know, in upgraded areas, NTL has relatively high uptake rates, 20% I think, which is much higher then Eircom. I myself have experienced their advertising, when they upgrade your area, they call and send lots of letters offering BB and they mention all the freebies (which I happily took), it is very effective.

NTL seem to be following the same very effective rollout plan as they did with Digital TV. With Digital TV they only advertised heavily in your local area once it was upgraded. However once they had all areas upgraded, they went into heavy national TV, radio and newspaper advertising.

NTL say they will have the whole of Dublin, Galway and Waterford upgraded by the end of the year. If true, then I expect a big national advertising campaign, this will put a lot of pressure on Eircom. Personally I think cable will have a much bigger impact on the market then LLU. Of course LLU is important also, however Eircom still have too much control over it.

NTL ditched voice too remember?

There are some rumours around that NTL are preparing to re-enter this market. The technology has greatly improved from what they were using and it would certainly be in line with UGC Europe's normal practise (they offer phone service in every other market).

Sponge Bob

bk wrote:

As you know, in upgraded areas, NTL has relatively high uptake rates, 20% I think, which is much higher then Eircom.

NTL were always the proof that Eircom are liars. In 2001/2002 , when Eircom were saying there was no demand for BB AT ALL by way of justifying their asset stripping and their inertia, NTL had up to 10% penetration in some areas . This was back when the only places in ireland with BB (2001) were Tallaght and Dungarvan .

Now that Eircom has 120,000 odd connections in a country with 1.4 million homes and 200,000 (I Think) businesses , 1 in 13 or so or 7.5% of premises , NTL has 20% premises penetration which corresponds to 320,000 eircom punters (counting resellers) . The gap is awesome but the gap is there because there is huge demand for BB but NOT at any price.

The differences are simply pricing and packages at a reasonable rate.

Smart had 16000 punters signed up before they had any exchanges live, the differences being pricing and packages again.

Eircom can waffle all they like in their SEC reports but until they bring the entry level below €49 a month , thats all in for BB and Line Rental, they are pissing in the wind as regards energising the BB takeup levels over their lines and on their terms or anything like it .

Lest they think they had a captive market I would remind them of the nasty shock teh publicans got in the past 2 years after their pricing policies finally broke the camels back. No more than Eircom and its line rental forcing people permanently onto mobiles the publicans forced the drinkers off home .

The only way either publicans or eircom can win back the biz is to compete on price , something they are ill equipped to do as monopolists or cartel members.

Solair

I got a very odd reaction from an eircom engineer a few weeks ago.. Shows you the attitude they might be dealing with internally..


Ordered an extra line for my home office.

The guy came, up installed it very promptly and there were no problems. (3 days from online order to working phoneline!)

However, over a cup of tea he started grumbling loudly about how people wanted second lines and how that screws up the whole system because it was only ever planned for 1 line per house and basically implying that I was a trouble maker and a creating havok on their network.

On the plus side, he did say that the number of lines in use is going down as people drop extra lines for internet access in favour of DSL.

So perhaps that's a positive!

He just seemed really hostile towards new technology of any type though. Came across that he was a real "old school" lines man from the days of wind up telephones in rural areas and electromechanical switching in urban areas and didn't like any of this new fangled digital nonsense.

He was all curious to see if I noticed the speed-up of the DSL though.

And did make a big effort to ensure that I had a genuine copper pair on my second line.

Friendly guy, but I'd say they've a lot of very old-school engineers in there!