Comreg takes on three consultants for Eircom split plan
Comreg has awarded four contracts to three consultancy firms to advise it on whether Eircom should be divided into a network arm and a retail arm.
The consultants are due to report in March and will have to detail what form of separation should be allowed.
One Irish company was among those selected by the Commission for Communications Regulation. IBI Corporate Finance has won the €712,846 contract to advise on corporate finance elements of the plans.
LECG, a US-based consultancy firm, won the contracts to advise on the strategic, economic and regulatory issues, while consultancy firms Oxera and Ellare have teamed up to advise on operational elements of the proposed changes. Structural separation of the Eircom network from the retail business has been the key objective of Babcock & Brown Capital, the Australian investment fund, teamed up with the Employee Share Ownership Trust (Esot) in a e2.4bn deal to take the phone company private.
Babcock & Brown's plan for structural separation of the network from the rest of Eircom, which is supported by the Esot, would see it set up a stand-alone company provisionally called Netco. The remainder of the business would be put into a company called ServeCo and may be sold on.
Manifesto
Fianna Fail committed itself to separation in its election manifesto although this commitment did not state whether the separation should be of the structural type sought by Babcock & Brown or merely functional separation. The latter, which would see each part of the business provide separate accounts, is favoured by the EU and is likely to be imposed on telco by the EU within three years.
One of the key questions the consultants will have to grapple with is what financial return the owner of a separate network should be allowed. Eircom is allowed an 11.5pc return on its wholesale operations. While allowable rates of return for utilities are typically 6-7pc, sources say Eircom may seek a much higher rate of return.
Another of the key issues for the consultants is whether a separate network should incorporate the existing 27, and planned 80 municipal area networks (MANs). These are small fibre optic networks funded by the Government as a competitor to Eircom.
- Tom McEnaney
