Business Irish

Saturday 19 August 2017

'The better you do, the more criticism you get - that's what's happening at Eir'

Things have come full circle for telecoms boss Carolan Lennon who has taken on a non-exec role as a bank director years after turning her back on the financial services world. She is also in charge of Open Eir's roll-out of fibre to rural homes in Ireland and tells John Mulligan that the former State-owned company plays fair with business rivals

Carolan Lennon has two high-profile roles and says she has ‘loads of energy and loves getting stuck into things’
Carolan Lennon has two high-profile roles and says she has ‘loads of energy and loves getting stuck into things’

Irish mammies. Where would you be without them? If Carolan Lennon's mother had had her way, her daughter might still have been working in financial services - at least, full-time.

Because it's funny how things come full circle.

Ms Lennon, the managing director of Eir's wholesale and network arm, has just been appointed a non-executive director at State-owned AIB.

She's even got the patter off.

"I thought it would be a really interesting challenge," she says of taking on the role last month. "I have a busy job in here, but if I was going to do one thing, I wanted to do a really interesting thing. I have loads of energy and I really like getting stuck into things."

She adds that a "strong AIB is good for Ireland" - as is a strong Eir (which was known as Eircom until last year, and which is now controlled by New York-based private equity firm Anchorage Capital).

Interesting, of course, that both Eir and AIB were at one stage complete basket cases, toying with oblivion.

AIB was bailed out by the taxpayer to the tune of €21bn. Eircom had the ignominy of having succumbed to the biggest examinership ever in Ireland - to prevent it being strangled by the then €4bn debt noose a succession of owners had tied around its neck.

But both companies are in much better health now.

Ms Lennon (49) - a northsider from Coolock in Dublin who cycled from there to UCD most days as an undergraduate (a good 45-minute jaunt) - says her mother "nearly died" when she gave up her "pensionable" job at Church & General (now Allianz) in 1996 to do an MBA at Trinity. She already had an IT degree from UCD.

Mary O’Rourke, then Minister for Public Enterprise, Ray MacSharry, Telecom Eircom chairman, and Alfie Kane, ceo of Telecom Eireann, at the launch of Telecom Eireann’s share offer prospectus in 1999 – a third flotation is said to be on the cards
Mary O’Rourke, then Minister for Public Enterprise, Ray MacSharry, Telecom Eircom chairman, and Alfie Kane, ceo of Telecom Eireann, at the launch of Telecom Eireann’s share offer prospectus in 1999 – a third flotation is said to be on the cards

She had caught the sales bug while working on an IT project at the insurance firm and wanted to expand her horizons.

"In those days, you certainly did not give up a pensionable job," says Ms Lennon, whose role at Eir sees her head a unit that in its last financial year generated revenue of €338m.

Following senior roles at Vodafone Ireland between 2002 and 2010 before joining Eir as chief commercial officer, her pensionable job now, as managing director of Open Eir, involves overseeing a major project to complete a roll-out of a fibre network to 300,000 premises in rural Ireland by the end of next year.

A total of €1.5bn has been spent on Eir's network over the past few years, with €400m of that directed to the fibre network deployment.

It came under Ms Lennon's remit in September as part of an organisational restructuring.

She insists that unlike some other competitors - she mentions Siro, the €450m joint venture between Vodafone and the ESB - rolling out fibre to rural premises, Eir is targeting properties that are generally located outside more built-up rural areas.

"No-one else is rolling out fibre in rural Ireland like we are," she insists over a coffee in Eir's swish headquarters near Dublin's Heuston Station.

"They're rolling it out in decent-sized towns or whatever. We're deploying on the ribbon roads and developments outside of small villages.

"We have passed 1.6m homes and businesses across the country," she adds.

Siro claimed this month that it has now connected high-speed fibre to 36,500 homes compared to Eir's 34,000.

However, she scoffs at the notion that Siro may be stealing any accolades from Eir.

"We've passed 68pc of the homes and businesses in the country so far," she says. "With Siro's 37,000, they've passed 1.6pc. In the time that it has taken Siro to pass 37,000 homes, we have passed 300,000 homes. We rolled out our network faster than BT in the UK, than AT&T in the US, or Germany's Deutsche Telekom - and our penetration rates are higher."

The rush to deploy fibre comes as rivals vie to showcase their credentials and commitment to rural Ireland in advance of the long-awaited decision by the Government regarding its National Broadband Plan (NBP).

That scheme aims to deliver minimum broadband speeds of 30Mbps to every home and business in the country, regardless of their location.

Eir, Siro and E-Net (the telecoms firm that manages the state-owned Metropolitan Area Networks, and which is now owned by a group of US investors led by Granahan McCourt) have all been shortlisted for the NBP contract, which could be worth the guts of €1bn. The winner will be unveiled next year.

The 300,000 premises Eir is delivering its new fibre to were originally earmarked to be part of the 750,000 that would be covered by the NBP.

Last year, there were rumbles of possible legal action by Eir against the Government in Europe if the State pursued its intention to cover the 750,000 premises, despite Eir planning to hook up 300,000 of them.

The Government later conceded that the 750,000 figure could be reduced if operators were able to show they could provide high-speed broadband in areas that would otherwise have been covered by the NBP.

"The 300,000 homes we're connecting have to come out of the NBP," says Ms Lennon "That would certainly reduce the NBP bill."

So why the land-grab in the areas that would have been covered under the NBP anyway? Lennon says that Eir had a "scaled-up machine" to deploy fibre in other areas, so it made sense, she maintains, to deploy it to what would have been NBP areas also.

"We looked at the commercial case, and we said, you know, there's a case for us to keep going," she says. "The Government shouldn't be spending hard-earned State coffers where there's a business case for roll-out.

"Building networks is a scale business," she adds. "You can't spend €400m and say we're only going to let 2pc of people use it. You have to get as many people as possible on to it. There'll be strong penetration and demand."

Still, a report this week from Switcher.ie - a consumer utility comparison firm - claimed that only 25pc of homes in rural Ireland are receiving speeds of 30Mbps or higher.

It added that a third of actual internet connections are less than 5Mbps.

Ms Lennon says the report "underlines the problem" that Eir is trying to address.

"We will reach 35,000 additional homes and business with Fibre to the Home (FTTH) by the end of this year and that will reach 300,000 homes and businesses within the next two years. This is real and this is happening," she says. "Vodafone, Siro, E-Net and Virgin Media are not going to reach these communities."

But despite its fibre roll-out, Eir remains a constant target for complaints from rivals, such as BT Ireland, which buy wholesale network capacity from the former state-owned telco.

Rival telecoms firms have frequently charged that Eir abuses its dominant position - something it denies.

But telecoms regulator Comreg recently appointed consultants including KPMG to examine Eir's dominant position in the wholesale telecoms market. A functional separation of Open Eir from the group is one possible outcome of the review, but not a foregone conclusion.

"Our biggest customers are also our competitors," says Lennon, "so I think you have to say they're never going to love us because we're in that competitive scenario. That's just the way it is."

Eir is obliged to treat its wholesale customers not as competitors, but clients.

She insists that 22 issues that had been raised by an internal report prepared last year - the Stiles Report - have been addressed.

Rivals no doubt still feel unconvinced. The report noted that Eir had not afforded rivals a level playing field in some areas.

"Some of the processes had been there for 25 years. It would have been much odder if the report had come back and said everything was perfect," says Lennon.

"Of course we were going to find something."

"You have to put it in the context of things that happen in the market, such as the NBP," she says."Some of those people who are critical aren't investing a single euro in rolling out fibre to rural Ireland. Are we perfect? Absolutely not, but we keep trying to improve.

"I can tell you categorically, that we do not treat our own retail arm any better than we treat the others. There is absolutely no policy of deliberate behaviour around treating them differently," she adds.

So it's just sour grapes? Rivals would baulk at such a notion.

"It's competitive tension," she says a bit more diplomatically. "Wholesale has been a huge part of Eir's growth. So sometimes I think that the better you do, the more criticism you get. The NBP is a part of it too. Everyone's positioning themselves."

All the work Eir is doing has helped the group to boost revenue and deliver profits. Revenue rose by 4pc to €1.3bn in the last financial year - the first time in eight years the company reported an increase.

Its earnings before interest, tax, depreciation and amortisation rose 5pc to €505m. Open Eir's revenue for the year was 9pc higher.

It all positions the telco (which now considers itself more of a media firm than a pure telecoms provider), to be either sold, or in the most likely scenario, to hit the stock market - again.

Another initial public offering would make it the third time the telecoms firm will have sold shares to the public.

Its debut - when the State floated what was then Telecom Eireann in 1999 - was an unmitigated financial disaster for most of the small investors who piled in to the business on the frenzy whipped up by the then government and former Minister for Public Enterprise, Mary O'Rourke.

When the third flotation does eventually happen, potential retail shareholders will probably be twice, or thrice, shy.

Eir's single biggest shareholder is Anchorage Capital, with over 40pc of its shares, but over 50pc of its voting control. Other shareholders are Singapore wealth fund GIC, and Davidson Kempner.

Ms Lennon says - as you'd expect - that the strategy of the company's shareholders is aligned with that of Eir management.

"We work with our shareholders very actively, and they are very committed to the capital investment plan," she says.

"We have been spending pretty much all the cash we generate on capital investment. They absolutely see that that's what has driven the improvements in our performance. It feels like our job is to complete what we started - to get Eir into a better place."

And as Carolan Lennon emerges into the top ranks of corporate Ireland, even mammy must be convinced by her pension prospects.

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