It's A Two Horse Race For Meteor

zuma

Eircom have WON!!!

bringitdown

zuma: link - who announced it?

dahamsta

http://www.rte.ie/business/2005/0721/meteor.html

bringitdown

arse bandits - well, my no eircom policy will have to be put under examination, I'll see what the muppets do before I leap off to another operator.

Solair

Well, just like BT are the good guys in the Irish market while being the bad guys in the UK fixed line market. Eircom will be the small player in the Irish mobile market and will have to be innovative and price cutting to survive.

Meteor's management team are pretty good and I can't see anything drastic happening at the company itself. They're not in a monopolist's position and never will be in the mobile market.

The eircom link will give Meteor a bit more cred' in the corporate sector and hopefully it might gain more than 10% of the market before too long.

I'd be more concerned that eircom/meteor does some kind of a decent deal on roaming. At present Meteor's roaming for prepaid customers is a bit of a mess. i.e. you have to have all of your calls charged to your credit card while abroad.

It would make sense for the small independent operators that are still left in Europe to set up another alliance, something along the lines of O2's "Starmap Alliance".

Eircom/Meteor will still be an absolutely tiny mobile operator by international standards, yet they'll be quite capable of putting it up to Vodafone in their home market.

It'll certainly be interesting to see what happens anyway.... I think Irish mobile market's just about to see a major dose of new blood very soon. We've 3 launching very shortly, this eircom-meteor thing and the possibility of a number of VMO (Virtual Mobile Operators) coming on stream. E.g. Smart/Virgin may still go ahead with a network piggybacking on either O2 or Vodafone. Likewise, we could see T-Mobile, Orange or any of the big names come in as VMOs... Will be good to see a bit more competition!

Shame it's not also the scenario in the broadband realm!

dahamsta

Solair wrote:

Well, just like BT are the good guys in the Irish market...

Least worst. Possibly. Maybe. Although unlikely when you get right down to it.

adam

paulm17781

Solair wrote:

I'd be more concerned that eircom/meteor does some kind of a decent deal on roaming. At present Meteor's roaming for prepaid customers is a bit of a mess. i.e. you have to have all of your calls charged to your credit card while abroad.

No you don't. You have to register a credit card with them and top up by 60 euro. I don't know why the need for the credit card but the money comes out of your credit.

You don't have to do this for the UK anymore but it is extremely expensive to use a meteor phone over there.

eircomtribunal

Frank Fitzgibbon raised some questions with regards to Eircom taking Meteor for this sort of price in this article in the Sunday Times of 17th July:

And Finally . . . Shareholders will pay if Eircom has overplayed its hand
edited by frank fitzgibbon

WE BET there weren’t too many smiles at Eircom’s headquarters last Thursday when the word went round that Denis O’Brien had withdrawn from the race for Meteor, the country’s third-placed mobile-phone operator.

With O’Brien deciding to exit the stage, leaving Smart Telecom as the only other possible buyer, Eircom is in pole position to acquire the business and launch its return to the mobile sector.

What should be good news is tarnished by the knowledge that O’Brien’s entry into the race succeeded in bidding up the price to such an extent that Eircom has achieved its strategic objective at a grossly inflated cost.

The threat of competition from O’Brien saw Eircom offer about €410m for Meteor. Eircom’s top brass may have to go into a dark room and lie down for a while when they consider that 18 months ago they could have picked up the business for €200m. They gave it a miss on the basis that it was too expensive.

This latest joust between old corporate Ireland, as represented by the Eircom chairman, Sir Tony O’Reilly, and the new corporate Ireland dominated by O’Brien’s generation looks like a win for the young pretender.

O’Brien lost out to O’Reilly in the battle to acquire Eircom in 2001, but he has since honed his poker skills and appears to have forced his corporate opponent into overplaying its hand. Like a gambler who throws the keys of his car on the table, Eircom will now have to turn to its shareholders to raise the funds required to complete the deal — encouraging analysts to take a closer look at the company’s ability to service its current level of dividend payments.

The bill for Eircom’s shareholders won’t end with Meteor either. Eircom is favourite to win the final 3G licence on offer from the government. The cost of rolling out that service, even with Meteor’s mobile network, could see Eircom’s shareholders tapped up for even more than the initial estimates of €250m.

P.

De Rebel

Its my belief that eircom were prepared to buy meteor at almost any price for 2 reasons. (1) They need a business with sky high gross margin very very badly in order to dilute their appalling overheads and fixed costs. (2) They see it as a massive opportunity to leverage their corporate customer base. Nolan spent a large part of the last 12 months focussed on closing this deal on O'Reilly's specific instructions (i.e. the CEO was doing the chairman's job)

It is my belief that O'Brien knew this, and entered into the race in a tongue in cheek; basically a pisstake so that he could wax lyrical at dinner parties about how his involvement ended up costing Sir Anthony an extra €100M or so.

Eircom have got what they wanted, and may even pull a last minute stunt in an attempt to bring the ultimate cost back down.

They stand to make a lot of money from this deal. Vodafone and O2 have been taking the mick for a long while now. There is huge pent up frustration in the corporate sector in relation to mobile phone related costs. These have moved in many companies in the space of 5 short years from an insignificant figure to 75% of telecomms voice costs. (i.e. the cost of a company's vodafone/o2 bill together with the "calls to mobiles" part of the eircom/esat bill. Its an area that eircom will now be in a position to put unique (and i mean unique in the true sense) products into the market which will certainly reduce costs, but still be hugely profitable by comparison with eircom's existing business units (where can you make a profit from maintaining copper, local and national calls, international calls etc, especially when you have twice as many employees as you should have using international comparatives).

The unique products will be ones that offer (1) single bill for all voice related comms services (land line and mobile) (2) reduced "on-net" landline to mobile and mobile to landline call charges (3) interoperability products - mobile is mobile rated when not in a cradle, but is land line rated when placed in a desktop/home cradle.

This is the hit that eircom wanted, and if i was an eircom shareholder I'd be very very pleased, especially if they can get the price back down towards 300/350m.

dahamsta

Someone pointed out the other day that any attempt by Eircom to consolidate their fixed and mobile businesses will fail, as demonstrated by BT's attempt in the past. I still disagree with this but I do think it's quite possible it'll fail, not due to lack of interest but rather Eircom's inability to push into the market and lead the pack, both technically and psychologically. (I.E. the company simply isn't psychologically set up to fight from the back, and still has too many hangups to push forward technically and get those products rolled out quick sharp.)

A lot depends on Vodafone and O2 though. If they're clever, they'll have already decided that they've milked the Irish market for as long as they can, and they'll have new pricing and discount plans sitting on the sideline, and new products and services on the drawing board. If they're not so clever, and Eircom actually manages to organise themselves, they'll be telling themselves that they'll get another couple months out of it, and Eircom'll cream them.

Fair dues to Eircom though. They helped me make a final decision about whether to move to Meteor or not.

adam

Cuauhtemoc

From the Indo..

EIRCOM is poised to re-enter the mobile market after the last remaining rival to buy Ireland's third mobile phone operator Meteor pulled out of the running yesterday.

Smart Telecom issued a statement saying it had withdrawn from the process. Yet banking sources said that it had tabled an 11th hour bid of €435m for Meteor.

Eircom is believed to have offered about €420m for Meteor which is being sold by US-based Western Wireless. It is understood that Smart's earlier bid had been just over €400m.

Smart Telecom said yesterday that it was withdrawing from the bidding process following a period of review by the boards of both Smart Telecom and Virgin Mobile, its bidding partner.

Analysts said the question of Smart Telecom's requirement to go to the market to raise funds in order to close the deal would have been a factor.

They added that if Eircom announces plans for a rights issue following formal confirmation of the deal, its profitable fixed line business and its massive customer base would make it more attractive for the investment community in raising a large sum.

One London-based analyst said that these issues would all have to be considered by both Western Wireless and its adviser on the deal, Deutsche Bank.

"It is not always the case that an asset will go to the highest bidder," he said.

"Deutsche Bank would also have to consider that the debt market might not value Meteor as high as the bidders."

Shares in Eircom finished down 2c at €1.85 yesterday. The company was not available for comment.

Interesting that they withdrew the 435 million bid.

oscarBravo

The idea of "on-net" mobile-landline packages is an interesting one, but would it be feasible? Wouldn't Eircom wholesale have to offer the same interconnect deal to all fixed-line telephony providers and all mobile operators, rather than being able to offer a sweetheart deal to either its fixed-line or mobile subsidiary?

SparkyLarks

They would have to offer it to another network I would think. i.e if O2 linked with BT and made one network then they would.

Alternatively Eircom Wholesale could keep their price the same but eircom reduce their margin on calls from landlines to metor networks. So they reduce margins, increase customers and turnover, without givin g an advantage to their compeditors.

Is that possible??

oscarBravo

Yes. It's called margin squeeze, and is supposed to be prevented by effective regulation.

Hornet

I think the success or failure of Meteor after a take-over by Eircom depends on the degree of "integration".

If Meteor will continue to stay at arms-length, then the detrimental inherent Eircom-attitude won't be a problem. Eircell didn't do too bad at the time!

If Eircom will try to integrate Meteor fully and, for example, fill all the relevant Meteor positions with employees who still think in Telecom Eireann patterns, Meteor will fail.

What I find surprising is that the change Eircom went through since it was privatised is really tiny. The company is run largely by a new set of people who were not around when Telecom Eireann was a state-owned monopoly, but the policies haven't changed much.

If I compare that to BT (in the UK!) the approach is a lot more open, accepting competition and competing in a positive way with the other telcos.

In the mobile phone market we still don't have a proper competitive situation, Vodafone and O2 happily kept the prices high and only when "3" (what a stupid name IMHO) starts making services available to MVNOs whe MIGHT see some proper price competition. I don't expect much from Eircom in that respect, but Imagine and others will definitely get back in the mobile market.

It will be interesting to see what Smart will do. They know that they absolutely NEED a mobile phone arm to the business to attract any buyers interest. And as this is the only thing they seem to work towards, they need to buy a licence and then set up their own network. The cost of such an operation will be not much below the Meteor price and the pain with self-build will be huge. Neither Smart nor Virgin Mobile have ever built a mobile phone network and with a new network build there will be cost from Day 1, but revenue will follow a good bit later. Could that break Smart's back?

--Hornet

SparkyLarks

oscarBravo wrote:

Yes. It's called margin squeeze, and is supposed to be prevented by effective regulation.

So If ericom does become efficant( hypotherical) and make savings in their retail side.
To lower their prices they have to drop the wholesale price., for which costs haven't been saved. Passing onto their compeditors savings for the increased efficincy of Eircom retail , even though the wholesale cost remains the same

not much of an incentive for eircom retail todrop prices if they become more efficant is it??

Could Eircom offer cheap calls from Meteoircom to Eircom landlines, as they are not the incumbant or dominant party in the mobile market??

eircomtribunal

SparkyLarks wrote:

Could Eircom offer cheap calls from Meteoircom to Eircom landlines, as they are not the incumbant or dominant party in the mobile market??

Weren't all the mobile players ComReg-designated as having significant market power status?

Whatever price Eircom will pay for Meteor (or whatever price Smart would have paid) it is us consumers who'll pay that bill in the end by overpriced mobile telephony.

P.

Tom Young

P.

Two markets in mobile.

1. Market for Origination

2. Market for Termination

Market 2. All (Four) are classified as having Single Network Dominance (SND) i.e. SMP applies. Including Hutch 3G, a network with no customers, but SMP!? Thus the first appeal to the ecap.

Market 1. Voda and O2, jointly dominant. With recommendations from the EU Comm Art 7. task force to watch fringe operators such as Meteor who are in newly formed roaming agreements. My estimate is that Meteor has 12% market share now. As opposed to ComReg's recent 9.x% finding.

TY 0)

Tom Young

SparkyLarks wrote:

They would have to offer it to another network I would think. i.e if O2 linked with BT and made one network then they would.

Alternatively Eircom Wholesale could keep their price the same but eircom reduce their margin on calls from landlines to metor networks. So they reduce margins, increase customers and turnover, without givin g an advantage to their compeditors.

Is that possible??

Funny part about this post is that I suspect eircom has mobile call elements built into the basket used to calculate fixed retail line rentals in Ireland since the eircell days. Basically inflating the prices to being the highest local/retail line rental pricing in the EU (25 member states).


Just a view.

Tom Young

oscarBravo wrote:

Yes. It's called margin squeeze, and is supposed to be prevented by effective regulation.

ComReg don't carry out transparent margin and price squeeze tests, thus eircom manage to retain fixed line and bb market shares.

Here's ComReg's latest failure to see margin squeeze: http://www.eircom.ie/About/Activities/pending.pdf

vinnyfitz

Can you elaborate a bit please Tom?

I'm amazed to see that Eircom are running a promotion on ISDN - waiving the connection charge for the next few months - but I'm not sure that is what you are getting at?

Tom Young

Only elaboration is that it almost below wholesale cost of selling services. ComReg should not allow this, or at least show the transparent review of the figures in a margin squeeze test.

SparkyLarks

If the whole sale price is a fair one Eircom should be allowed charge whatever price they like( in my opinion). and so should any other provider.

What eircom should not be allowed do is set the whole sale price at say €100 and offer a retail price of 101 euro, and make vast profit on wholesale and force compeditors out of the market.

viking

http://www.breakingnews.ie/2005/07/25/story213225.html

25/07/2005 - 07:23:39

eircom has announced to the stock exchange its intention to acquire mobile phone operator Meteor for €420m.

The acquisition is intended to be funded by a rights issue at a minimum subscription price of €1.10 per eircom share (the "rights issue"). The rights issue price will be set when the prospectus is published, which is expected to be in late August 2005, and has been fully underwritten by Morgan Stanley and Goodbody Stockbrokers.

The acquisition is conditional upon the approval of eircom shareholders. The eircom employee ownership trust, which holds 20.9% of eircom’s total issued ordinary share capital, is to vote in favour of all resolutions at an extraordinary general meeting required to approve and implement the acquisition.

The acquisition is in line with eircom’s stated strategic objective of re-entering the attractive Irish mobile sector, which has among the highest average revenues per user (ARPUs) in Europe as well as attractive demographics. It is also expected to enable eircom to effectively double its addressable market by value to approximately €4bn.

Meteor, a wholly-owned subsidiary of Western Wireless International Holding Corporation, is Ireland's third mobile operator in terms of subscriber share with a subscriber base that more than doubled from 181,000 as of 31 December 2003 to 410,000 as of 30 June 2005.

Meteor had total revenues of €93.9m last year, with 10% share of the mobile phone market in Ireland. Eircom said today that it expects to be able to double this share and to grow ARPU over the next three to four years.

"In addition to accelerating pre-paid subscriber acquisitions, eircom will seek to drive growth by focusing on building share in the post-paid consumer, corporate and SME segments," the company said today.

Completion of the Acquisition is expected by the end of 2005, following appropriate regulatory approvals/notifications.

Commenting on the proposed acquisition, eircom chairman Anthony O’Reilly said: "Winning the bid for Meteor delivers on our promise to lead eircom back into mobile. The acquisition will transform the growth prospects for eircom, which is good news for our shareholders and for our employees."

Urban Weigl

"The Consumers' Association of Ireland says the sale of the country's third mobile phone network to Eircom should be good news for consumers."

The Consumers' Association of Ireland thinks that Eircom is good for the consumer. I am sure that they are right, because after paying €420 million for Meteor, Eircom will start a price war with Vodafone and O2!

zuma

We will still be paying the most in Europe(as usual) for mobile calls no matter what happens!!!

RuggieBear

Think i might just have to rid myself of my Meteor phone now. Not sure i could stomach giving Eircom anymore money.:(

masterK

It will be interesting to see what happens with the Eircom employee ownership trust. One would think that the current Meteor staff would be looking for a chunk of ownership of the new company, however will the existing Eircom staff be willing to allow this?

paulm17781

Can anyone remember what the market value of Eircell was when it was sold to Vodafone?

bringitdown

paulm17781 wrote:

Can anyone remember what the market value of Eircell was when it was sold to Vodafone?

€3.6 Billion!