Sunday 21 January 2018

Eircom chief warns of further cost cuts

Flat sales pushing revenues down as fixed-line voice traffic falls and consumers tighten spending

John Mulligan

EIRCOM chief executive Paul Donovan has warned that he foresees no pick-up in consumer spending in the near to medium term as austerity measures designed to get the economy back on track force customers to tighten their purse strings.

Further cost cutting will be required if a decline in voice traffic on its fixed-line network is not stemmed. The company is already in talks with unions on achieving €92m in cuts over the next three years on top of €90m that have already been implemented.

Mr Donovan made the comments as the telco, which is labouring under a €3.8bn net debt pile and is majority-owned by Singapore Technologies Telemedia (STT), reported a 5.6pc fall in revenues to €442m for the period ended September.

That included a 5pc fall in revenue from fixed-line services to €347m and a 9pc drop in revenue from its Meteor mobile arm to €108m.

Group-adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were flat at €168m for the quarter, with the figure flattered by decreased operating expenditure during the period as the company had completed the implementation of its new billing system in 2009.

Fixed-line adjusted EBITDA rose just under 3pc to €144m, while operating profit at the division rose almost 20pc to €68m.

Mobile unit

EBITDA from the mobile unit declined to zero from €28m in the corresponding quarter a year earlier. Average monthly revenue per user (ARPU) at Meteor, which has just above one million subscribers, fell 10pc year-on-year to €32.32 in the quarter, mirroring declines experienced by rival operators.

Mr Donovan said that the fall was a result of cheaper price plans, a reduction in mobile termination rates and a "changing mix" of traffic between networks.

Its new Emobile operation had 25,000 customers at the end of September, just days after it launched.

Speaking to the Irish Independent, Mr Donovan declined to elaborate on negotiations the company is having with its lenders regarding its debt pile. He would not rule out a debt-for-equity swap, however.

"I have no prejudice about the way in which we address our issues," he said.

"It's a very complex structure, there is no single remedy that we can rely on. The issues are still actively under consideration by shareholders."

Chief financial officer Peter Cross said Eircom was operating within lending covenants. Ratings agencies believe Eircom could breach at least one covenant within 12 months.

Irish Independent

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