SBPost: Consumers to be hit by Valentia bank flop

SkepticOne

The Sunday Business Post reports that due to a collapse in financing, consumers will have to cough up:

The scale and cost of Valentia's borrowings are such that the company will either have to massively increase its prices to consumers, embargo capital expenditure or make thousands of workers redundant if it is to repay the €1.4 billion debt within the terms set down by the underwriters.

Article here. "This is likely to put pressure on telecoms regulator Etain Doyle to allow Eircom increase its charges to consumers", the paper says.

What? Why is Eircom's debt mountain the problem of Etian Doyle and for that matter us? In a competitive market (and we are told this by both Eircom and the ODTR), a company that can't pay its bills simply goes under and other companies take its place. Why should we carry the can for someone elses get rich quick scheme?

On the subject of debt, there's story in the Sunday Times about NTL.

Drowning NTL clings to France Telecom

NTL's 32 "courses" are the 32 acquisitions it made during the telecom go-go years of 1998-2000. Lovingly listed on the company's website, they range from the £8.7 billion purchase of Cable & Wireless's cable business to a smattering of stakes in British football clubs: Newcastle United, Aston Villa, Middlesborough, Leicester City and Rangers.

A common feature of these acquisitions is that they are now worth much less than NTL paid for them. This is bad news for France Telecom, which provided £5.2 billion of the backing that allowed NTL to buy the C&W business, as well as Cablecom in Switzerland and a £440m stake in Noos in France.

I'm bothered by the fact that this company made huge amount of purchases during the dot-com era and now can't afford to bring our cable infrastructure up to modern standards. The lowering of prices for existing upgraded areas is obviously a way of squeezing a bit of revenue of broadband.

chernobyl

Let them go bust and the state can buy Eircom back @ a significantly lower price to the one it was sold for.

MS

Hope the link works

SNIP
__________________________________________________
If you defraud the State of a few pounds by fiddling your tax or social welfare claim, you may end up in court and even jail. But if you are a politician, or a company director, you can make mistakes that cost taxpayers and/or shareholders billions of pounds and still survive to draw your ample pension.
_________________________________________________

Read on

http://62.17.153.131/action.asp?id=6939&news_id=features


MS

SkepticOne

Originally posted by chernobyl
Let them go bust and the state can buy Eircom back @ a significantly lower price to the one it was sold for.

The problem is that they won't be allowed to go bust. If they don't get money out of the public, they have the power to make things very difficult for the country. Like NTL (also in severe financial difficulties), they can also put pressure on the ODTR and the Government to raise prices simply because they have power over a monopoly resource.

They have already sought significant increases in line rental. This is something that people would have no choice but to pay. They would probably not raise long-distance calls, because people would simply switch over to another provider so they chose an area where they have a captive market.

Boston

well NTL are mking huge money here and thats the main point.

As for eircom, if the Reg allows the massive (and they will be massive) increases in prices inflation will nearly dubble, it will have a knokc on effect on the econome which will only but us into a deaper resession.

also, 10 year ago they would have gotthen away with it, but if they dubble the line rental(thats what they want) then other companies may see the sense in investing in their own telophone network, but keeeping it under 25% of the market.

so basically, i dont think ill be still with eircom by the end of the new year and they know it

NeilF

Originally posted by SkepticOne
Why is Eircom's debt mountain the problem of Etian Doyle and for that matter us? In a competitive market (and we are told this by both Eircom and the ODTR), a company that can't pay its bills simply goes under and other companies take its place.

Good point. At least Eircom are now the ones in trouble and that must give Etain Doyle the upper hand. She now has the power to insist on FRIACO or ADSL in exchange (pardon the pun ) for increases in line rental. Let's hope she takes the opportunity to get them while they're down.

yellum

Can a monopoly really go bust ?

jmcc

Originally posted by yellum
Can a monopoly really go bust ?

I think there is some legislation that prevents companies from trading if they are insolvent.
However Eircom seems to be up sh1tcreek on this one. There has been a major retreat from telecoms investment compared to a few years ago. The morons in Eircom management sold Eircell at a firesale price. Eircom has to eliminate 3500 jobs and it looks like it will be really screwed for the next few years just making the interest payments on the borrowing. I suppose I should feel sorry for the people about to lose their jobs but all that mercy got used up paying phonebills. Eircom failed to innovate and just ripped off the consumer (and it continues to do so). As a company, it will probably be broken up for a firesale in a few years.

Regards...jmcc

Boston

BTW did i mention i think this is great, we all news this would happen, eircom have something like a 3 year plan to payback most of what they owe, it they dont met this they will have to sell, and i only know one interested buyer, thats right o brien

SkepticOne

Originally posted by yellum
Can a monopoly really go bust ?

Very unusual in normal circumstances, but we're talking about Eircom here.

Normally a monopoly means guananteed revenue from a captive market, however this revenue has been fully discounted in the loan obtained by Valentia. Now, with the colapse in financing, interest payments will be much greater. Increasing the number of redundancies will not help them in the short term because the redundancy payments will increase the debt. They need money fast.

They only way they can achieve this is by raising prices. They can't go for long distance charges because that is a fairly competitive market and people will only switch to other providers.

Wholesale carrier preselect charges might be increased, this would allow Eircom to raise its local call charges and up the cost to competitors at the same time, but people might just reduce the number of calls they make or they could switch to mobiles. Nevertheless, this is an option.

That leaves line rental. Here they can make use of their own prior underinvestment to justify increases. They only option for the punters would be to get rid of their local line. In the current investment climate it is not likely that other operators will move in and create other local lines. Eircom are likely to be most agressive in seeking increases in this.

If we were talking about a competitive market for example, supermarkets, no one company would have the option of foisting its problems onto its customers. The supermarket chain with financial dificulty would not have the option of doubling the price of bread and basic goods.

It is time for the ODTR and the Governement to come clear about the lack of competitiveness in the Irish telecomms market.

How can we stop Eircom's problems becoming our problems?

dahamsta

Jesus wept folks, this isn't news!

http://adambeecher.com/misc/IO/htm/alfie_kanes_performance_bonus.htm

That's my third time posting that article. Ask yourself this - if The Phoenix can spot it, how the hell didn't the Government spot it? Why the hell did they approve the Valencia takeoever? And where the hell do Valenca get the gall to try and lay this off on the Irish people?

If the current government give them one inch of room on this, they can forget about coming to my door come the election, I swear to god. I'll tear them apart.

adam

Fergus

The Ireland of Sunday article says it all:

Never in the history of the State have citizens lost so much through the incompetence of civil servants, politicians and businessmen.

Eircom is a Significant Market Power under EU legislation. It must be locked-down that they cannot increase their line rentals and wholesale prices until LLU is settled with a cost-based price. They cannot be allowed double their rental until consumers have an alternative provider on the local loop.

If competition on local loops is still unrealistic despite LLU (competitors don't think it's worth it), then that makes the case that the local loop is clearly a scarce and essential resource required by all citizens and as such should be operated on behalf of the state, and should not be in private ownership.

It's looking a bit like a Railtrack. Let Eircom go bust, and then re-nationalise it. Tacky, but despite all the monumental cock-ups to date, the conflict of interests between eircom and telecommunications users must be resolved.

dahamsta

Let Eircom go bust, and then re-nationalise it.

Ditto. Valencia made their bed, let them lie in it.

adam

Delphi91

Originally posted by Fergus

quote:

Never in the history of the State have citizens lost so much through the incompetence of civil
servants, politicians and businessmen.

Now that's a campaign slogan if I ever heard one!!!!!!!

It beggars belief that after screwing the country for years on end, then (in collusion with the Government) selling themselves to the public as a wonderful investment, they then get bought out, and now are going to ask the country yet again for more money to pay off their debts!!

What sort of an idiot buys a company without looking to see first of all if he can make enough money from the company to pay himself back for the cost of buying the company????

The ONLY way out of this that I can see is for the Government to IMMEDIATELY implement legislation ro allow other Telcos to use Eircom facilities. Otherwise, Eircom will have us by the short and curlies (even more than they currently do!!) when they look for higher charges.

Mike

Boston

Originally posted by Delphi91


Now that's a campaign slogan if I ever heard one!!!!!!!

It beggars belief that after screwing the country for years on end, then (in collusion with the Government) selling themselves to the public as a wonderful investment, they then get bought out, and now are going to ask the country yet again for more money to pay off their debts!!

What sort of an idiot buys a company without looking to see first of all if he can make enough money from the company to pay himself back for the cost of buying the company????

The ONLY way out of this that I can see is for the Government to IMMEDIATELY implement legislation ro allow other Telcos to use Eircom facilities. Otherwise, Eircom will have us by the short and curlies (even more than they currently do!!) when they look for higher charges.

Mike

the same idiot that has run chorus into the ground.
to be honus, this will probably achieve a great long term goal of mine and a few other people. To see the total down fall of eircom.

Seriously, when eircom goes solvent, and everyone in Ireland will start asking how this was allowed to happen, with is why we have take over rules, this is why back handers and ****e like that will destroy this country, id rather see it run by Germans then assholes

disConnected

OK, this might not be viable for business-users, but consumers should be able to stick to this for a while:
If Valentia/Errorcom really want to let us pay their bills via hiking up the line-rental then I am getting rid of my landline.
I'll be using the mobile for phone-calls. Considering a much higher line-rental makes phone-calls via land-line nearly as expensive as mobile-calls anyway. And there is at least a small bit of competition in the wireless-market.
For the internet I'd get 2-way satellite (maybe set up as a 'joint-venture' with one of my neighbours, utilizing WiFi).
If enough people would do the same and get rid of their land-line Valentia would be the losers and not the consumers...

I'd love to hear from you guys what you think...

MS

If Valentia/Errorcom really want to let us pay their bills via hiking up the line-rental then I am getting rid of my landline.

Count me in, I think £340+ every 2 months would be a big saveing to me and more wisely invested in anything other then Eircom.

If enough people would do the same and get rid of their land-line Valentia would be the losers and not the consumers...

Something i would love to see but how many people would do it ?. Fags are roughly £4 a packet but people still buy them. So the thing is. How far are we all willing to let Eircom/Valentia push up the prices - fob us off - rob us of the right to come out of the dark ages before we say STOP! we have enough!


MS