Eircom board warns against nationalisation
The board of Eircom would not support moves to take the company back into public ownership, its acting boss, Cathal Magee, said this weekend.
The telecoms giant is working on an alternative proposal to the €95m takeover bid made by Rob Topfer — a former Babcock & Brown executive — last month.
Eircom will shortly appoint a corporate adviser to help it put together a solution to support the long-term future of the company. The Eircom employee share ownership trust (Esot), which owns about 34 per cent of the company, will also have a say on the company's future.
“Nationalisation is a matter for the Government but we are looking at the development of a commercial solution,” said Mr Magee, who will be in the hot seat until Vodafone executive, Paul Donovan, becomes the new Eircom chief executive this July. “Eircom has not held nationalisation talks with the Government.” There have been a number of calls for the Government to renationalise the telecoms giant, which is struggling with a massive €4bn debt. Earlier this year, the Irish Congress of Trade Unions urged the Government to take Eircom back into public ownership to speed up the rollout of broadband across Ireland. Labour Party leader Eamon Gilmore made a similar call last month, when he described the privatisation of the company as a disaster for its customers and the State.
Eircom Holdings — the majority shareholder in Eircom — is formerly known as Babcock & Brown Capital (BCM). Along with the bid from TaemasBridge — the consortium headed up by Topfer — Eircom Holdings is thought to have received two other bids. One of these is understood to be from Singapore Technologies Telemedia, while the other is from a private equity group. Hutchison Whampoa, owned by Asia’s richest man, Li Ka Shing, is also monitoring the situation. Hutchison owns the 3Mobile business in Ireland.
“The company preference is for a strategic investor who would have a long-term vision and plan for Eircom,” said Mr Magee. “It could be an industry player. It could be another telecom investor.”
Any potential Eircom suitor is likely to be a large international player who knows the industry.
Although Eircom has said that it does not support the TaemasBridge proposal, industry sources believe Mr Topfer may return with a better bid. “There's an expectation that he may come back but he hasn't made any further contact (since the initial bid),” said a well-placed source.
BCM has previously told its shareholders that its preference was to secure a buyer by the end of June. Eircom announced last Friday that Mr Donovan is to take over the reins of the company. Mr Donovan, who spent nine years with Vodafone, is a former chief executive of Vodafone Ireland.
Last week, Eircom and its unions agreed a major restructuring plan that will see the company shed 1,200 staff over the next two years. The deal — which will help Eircom save €130m a year — includes voluntary pay reductions of between five and 10 per cent, a two-year pay freeze, and cuts of around 25 per cent in some staff allowances, such as subsistence and mileage rates. On top of this, there will be no performance bonuses paid this year and the next two years. Eircom is also expected to announce measures to tackle the €430m deficit in its defined benefit pension scheme by the end of July.
- LOUISE McBRIDE
