Friday 20 October 2017

Comment: Eircom's owners likely to seek an exit

Eircom is set to raise its prices
Eircom is set to raise its prices
John Mulligan

John Mulligan

There's one thing that you can be sure of: Eircom will eventually be either sold or finally make its reappearance on the stock exchange.

Its private equity owners were keen last year to make an exit in a deal that would have valued the company at around €3bn. That an offer of up to €3.3bn was rejected suggests the owners believe more value can be extracted from the telco as it benefits from increased capital spending on its network and an improving economy.

Ratings agency Fitch seems to think the same thing. Last month, it upgraded Eircom's debt, citing the turnaround at the company for the boost. It said revenues "look increasingly likely to stabilise" and that cost initiatives will improve operating cash flows.

It added: "While Eircom's leveraged balance sheet is unusual for an incumbent telecom, the business transformation and stabilising revenue outlook is a significant achievement in a sector where topline declines and margin pressure remain a risk." The risk from the public's point of view is that Eircom is sold and becomes a basket case again. A string of owners had piled on debt and underinvested in its network, bringing it to the brink of collapse. The high debt crippled Eircom's ability to invest and also meant that it lost critical competitive ground. The telecoms landscape has changed significantly since Eircom was first sold to an unsuspecting public in 1999. The intervening years have seen competitors invest heavily in telecoms networks, and the way in which many consumers avail of services has also undergone a seismic shift. For many homes, landlines are a mere afterthought.

Still, telecoms watchdog Comreg continues to designate Eircom as the country's so-called universal service provider.

That means it believes Eircom should be responsible for the national provision of phone services, something Eircom has railed against. It's hard to imagine that designation lasting too many more years. In the meantime, the telecoms landscape will continue to shift, as too will Eircom's ownership.

Irish Independent

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