Eircom seeks approval to split company in two
Telco Eircom has made a written submission to both the Government and telecoms watchdog ComReg outlining its plans to split the company's wholesale and retail arms into two separate operations.
The move is a global first for a structural separation of a company as the two divisions would eventually have different owners.
Babcock & Brown Capital, the company's owner, is planning to sell off the retail division and retain ownership of the lucrative wholesale arm which owns the firm's network.
Babcock, which bought Eircom last year for €2.4bn excluding debt, has given the two divisions working titles -- 'netco' and 'servco' for the wholesale and retail divisions respectively.
The Minister for Communications, Eamon Ryan, is currently studying the submission as is ComReg.
A timeframe for an analysis of the proposal is not clear yet but it is in the mix of the priorities for the new minister as well as issues like broadband, the Broadcasting Bill and postal issues.
If the split goes ahead, it will be politically sensitive considering the history of Eircom's first flotation back in 1999 in which thousands of punters got stung.
The Department of Communications said yesterday that Eircom is a private company and what it does is a matter for itself. However, it added that there may be regulatory issues related to the splitting of the business.
"Eircom is a private company and how it organises itself on a corporate basis is primarily a matter for the company itself. If, for example, Eircom decides to split, there might be regulatory obligations on the company but that would for Eircom and the regulator," a spokesperson for the department said.
She added that the document is a "discussion" document and also contains proposals for other aspects of the telecommunications sector.
ComReg also confirmed the written approach. It said in a statement to this newspaper: "Eircom has approached ComReg (and the Minister for Communications) with proposals regarding the possible structural separation of the network and retail components of the company. ComReg intends to carefully consider the implications before adopting any view on it."
The Irish Independent first reported that Eircom was planning to sell off its retail arm earlier this year. The retail arm is valued at around €1bn while its mobile arm, Meteor, is worth an estimated €800m. The document comes at a time when Eircom is reconsidering its position on the Government's own telecommunications network, called the Metropolitan Area Networks (MANs), which is being rolled out in towns around the country. Eircom has long argued that the MANs duplicate its own network and the company is considering taking legal action on the issue, although not for the first time.
In March 2006, following an investigation, the European Commission approved €170m in funding for the second phase of the MANs project, although the Government is currently undergoing its own "value for money" assessment on the first phase of the MANs.