eircom drastically reduce capital spending

crawler

From the SB Post.

Eircom has slashed its capital investment programme by more

than 40 per cent, according to a telecom equipment industry source.

The cutbacks in the company's capital spending began last year and industry suppliers have complained of a dramatic fall-off in orders from the company.

The trimming of capital expenditure was inevitable given Eircom's need to generate additional cashflow.

This is needed to fund the massive interest payments on the debt raised by Eircom's parent -- the Tony O'Reilly-led Valentia consortium -- which bought Eircom last year.

When fully drawn down, Eircom's total annualised interest bill on the €2.3 billion of syndicated debt raised to part-fund the Valentia buyout is over €100 million.

This interest expense represented nearly double the company's return from its core network business last year

ednwireland

This is very very bad news - read the same article myself
I have suspected as much see the thread on ISDN lines unavailable in Donegal town,
http://www.boards.ie/vbulletin/showthread.php?s=&threadid=67995
This cutback on investment will be more noticeable in rural areas as we already have a crap network and it will deteriorate rapidly as I believe they will cut down maintenance to the abssolute bare essentials to keep the network running.
Why doesn't this suprise me - tony o'reilly borrows loads of money to buy eircom, hence large interest repayments therfore eircom has no funds to do capital investment money has to be stripped out the company to pay the interest. This was an inevitable consequence of selling the company to a private investor. i also remember that these loans were very short term (5 years) which means that the banks will soon be after them for even more money.
scenario eircon defaults banks forclose on loans ireland has no telecoms and data infrastructure. Well done to ff/pd gov. who seem through shear incompetance to have managed to ignore all these minor details when selling the company - where was the financial due diligence i would like to know

crawler

It's called "sweating the assets" - very annoying.

MDR

We expected this ...

timod

Seems to be a syndrome across the Telecoms industry. I wonder if the Eircom board have seriously considered splitting the company* and concentrate solely on network provision. (as lots of us have suggested before) Might be one way to go forward, and seems like a logical solution from a business point of view.


(*properly, not some token thing like there is now)

MDR

I wonder if the Eircom board have seriously considered splitting the company*

nah, there is far too much opportunity to rip the consumer off directily.

Dangger

In the new year we will see an offer made for ESOT's (the union's) 15% holding by the owners, and large scale redundancies in the Spring. It's the next logical step. Apparently there are already rumblings a foot.

yellum

It could do with being made more efficient but will the layoffs help that at all.

It would be nice to see some new fresh blood taking over in there.

Has Eircom sold their land yet ? They had a good bit of it on their books I believe.

Whats the advantage of holding on to Eircom.net and Indigo ?

jd

Originally posted by yellum

Whats the advantage of holding on to Eircom.net and Indigo ?

Brings in call revenue to their retail division,

Fallschirmjager

it begins....


what you are seeing here is potentially another worldcom implosion about to take place..

the redundancies are inevitable at this point i would say...

jd

Originally posted by jd
Actually esot ( don't have to be a member of the union) have 30% approc, but some are preferential shares..
http://apro.techno.net.au/apx811.htm

SkepticOne

If they felt they needed to invest heavily in capital (for example if they had to compete) they would restructure their short term debt and release some funds.

I wonder if the wiring up of new housing estates counts as capital investment. There has been a marked fall off in new housing developments.

If I remember correctly, there was a report in the paper about Eircom "losing money". Upon closer examination, it turned out that a lot of it was one-off expenses associated with the closing down of loss-making businesses.

Eircom playing the poor mouth.

Paddy20

Maybe if Tonyboy gave back his Knighthood. Eircom might stand a chance of survival in the forthcoming telecommunications war that is about too hit the Irish market.

As far as I am concerned they should be re-possesed by the State and turned back in too a public utility service provider ASAP.

paddy20;)

jd

Originally posted by paddy20
Maybe if Tonyboy gave back his Knighthood. Eircom might stand a chance of survival in the forthcoming telecommunications war that is about too hit the Irish market.

As far as I am concerned they should be re-possesed by the State and turned back in too a public utility service provider ASAP.

paddy20;)

There may be some argument for that wrt the infrastrucural side, burt certainly not the retail element. And the valentia grup would have to be compensated...
The Eu may not allow it either

jd

Originally posted by SkepticOne
If they felt they needed to invest heavily in capital (for example if they had to compete) they would restructure their short term debt

I think this was proposed by Nolan, as the valentia group is heavily leveraged with short-term debt.

jmcc

Originally posted by jd
I think this was proposed by Nolan, as the valentia group is heavily leveraged with short-term debt.

Yep but there is a lot of "let the fsckers burn and pick the assets up at the firesale" attitude floating around. It is going to be hard for all those ex-Eircom employees who will not be able to get a job after being culled.

Regards...jmcc