Monday 23 April 2018

Adrian Weckler: The axeman cometh: Eir looks to Lidl as billionaire boss cuts jobs

New Eir owner Xavier Niel Photo: Bloomberg
New Eir owner Xavier Niel Photo: Bloomberg
Adrian Weckler

Adrian Weckler

Bienvenue en Irlande, Monsieur Niel. And quel entrance: your first pronouncement is to let a quarter of your company's staff to go under a voluntary redundancy scheme.

But why? After all, Eir's doing pretty well. It's making money. It has healthy margins. It's now rolling out fibre broadband. Its mobile business has held steady in a viciously competitive market. It even has a growing TV business.

In short, it's a completely different, modernised company to the one that was creaking so badly when it came out of receivership.

So why let quite so many people go? It seems to be an issue of company culture. Xavier Niel, by several accounts, likes to run a lean, simple operation. Think Ryanair and Lidl, we're told.

This was hinted at a little by new Eir CEO Carolann Lennon, who announced the cuts. Eir's products and processes would need to be "simplified", she said. "In tandem with improving efficiencies, we seek to realign our cost base to match the leaner, more agile organisation that we need to be," said Lennon.

This probably means fewer products. It may not mean cheaper products, though - Eir is a heavily regulated company for many of its services. So the paring down of products or services may solely be to increase profitability for the company's new owners and possibly its directors and senior executives.

To be clear, this is a completely legitimate private company strategy. And the outgoing senior management can't have too many complaints, having secured some €100m from the sale to the French billionaire Niel.

But from a national perspective it would be a shame if Eir, having scraped itself back to being a top-tier telecoms provider, is now looking to sweat its assets a little more at the cost of development or innovation. This is certainly the fear that many might now have around Eir's new owners.

After all, there is no real statement of intent as to what sort of company Eir wants to be, other than it wants to cut its costs.

Does it still want to be a high-grade broadband player?

What are its aspirations in mobile? Is it still serious about becoming a significant TV rival to Sky and Virgin?

The company's new management isn't saying much about any of these big questions.

It's possible they don't yet know and have simply been told to cut a quarter of the workforce right away.

But it will need to formulate a strategy pretty soon.

There is no less of a challenge to Eir's position now than there has been in recent years.

For example, it badly needs a plan to bring its urban broadband services up to speed. Its old copper phone lines, still used for the vast majority of its urban broadband network, will be obsolete within a few years.

With 5G on the way, there may soon be no reason whatsoever to have a non-fibre or non-cable landline.

Senior figures in government have privately acknowledged this to me in recent months when comparing the rural fibre network to be built under the National Broadband Plan to what we currently have in cities and urban areas at present. Cities will then have just one high-speed option, which exists through Virgin's cable network.

So if Eir wants to remain the country's largest telecom operator in the long term, it has to start planning more of its own fibre in Dublin, Cork, Limerick, Galway, Waterford and other built-up areas right now.

Then again, if the new owner just wants to flip the business in a couple of years - following the example of previous owners - there may be no need to bother with any such planning. He may just want to get as much cash as possible out of it right now.

And then there are regulatory considerations. Eir is still in hot water on a number of fronts.

Two weeks ago, ComReg announced a new High Court action against the company for its wholesale division favouring its own retail arm over competitors when it comes to address-matching.

What is clear is that there will be a lot fewer people to tend to the company's products and services.

That may mean that service levels could be impacted.

Let's hope not, though.

For all the undoubted competition that the Irish market now has, Eir is still a critically important infrastructural player, as important in some areas as the ESB or water companies.

To be fair, Eir has let lots of people go before and stayed healthy.

Let's hope it manages to maintain this record.

Sunday Indo Business

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