Wednesday 13 December 2017

Eircom looks at outsourcing operations in bid to cut costs

Eircom Group Headquarters
Eircom Group Headquarters
John Mulligan

John Mulligan

Eircom is looking at outsourcing its transport and logistics operations in the latest measure to drive down costs at the telecoms firm where sales are slumping.

Releasing first-quarter results yesterday, Eircom said its revenue in the three months to the end of September fell 9pc to €323m, while earnings before interest, tax, depreciation and amortisation (EBITDA) slipped 1pc to €119m.

In the first quarter of the last financial year, revenue fell 7pc and EBITDA declined 10pc year-on-year.

Eircom has been slashing its workforce and aims to reduce it by 2,000 by next summer. About 800 have already left and, of another batch of 830, a chunk will leave by the end of December.

The telco said that its operating costs fell 13pc to €204m in the latest quarter.

Speaking to the Irish Independent, chief financial officer Richard Moat said the company was keeping every part of its cost base under review but EBITDA had continued to stabilise.

He confirmed that part of that review included possible outsourcing of the company's transport and logistics function.

Eircom underwent the largest examinership process ever in Ireland last year. Senior lenders took control of the business under a deal that saw the telco's debts slashed from about €4bn to €2.3bn.

US private equity group Blackstone was one of those that took a hit on its investment in Eircom under that deal. However, the group has since boosted its stake in Eircom to slightly under 25pc. A debt-equity agreement, which meant post-examinership that any investor taking an equity position in Eircom had to also assume debt, ends next year. That will make it easier for other investors to buy stakes in Eircom.

In Eircom's fixed-line arm, revenue fell 10pc in the first quarter to €249m and EBITDA declined 6pc to €111m.

Mr Moat said Eircom's fixed-line business was shouldering the bulk of revenue declines.

NETWORK

Eircom is spending over €400m rolling out a high-speed fibre network, while it has also launched a 4G mobile network and a pay TV service.

The company's chief executive, Herb Hribar, said that those new services would start to have an impact on revenue. He said there had been a "really good" response to the new 4G network, while Eircom had also been investing heavily in trying to attract higher-spending postpay mobile customers. The company owns the Meteor mobile brand.

Mr Moat said the planned takeover of O2 Ireland by 3 wouldn't receive regulatory approval until next spring and would probably take between 12-18 months after that to bed in. He said that gave Eircom "some runway yet" to secure more mobile customers.

Revenue at Eircom's mobile division fell 5pc in the quarter but its EBITDA rose to €8m from €2m in the first quarter last year.

Irish Independent

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