Eircom’s quad-play future: TV services to come in wake of fibre and 4G
Eircom's new CEO Herb Hribar
Eircom’s new CEO Herb Hribar and its new CFO Richard Moat have revealed that Eircom is planning new TV services to compete with UPC and Sky and plans to create a ‘data everywhere’ network experience by combining its new fibre and 4G LTE networks with existing strengths in mobile, landline and Wi-Fi.
Whenever there’s a crisis, it always has to get worse before it gets better and for Eircom this past year has been a tough one. You could say it’s been a non-stop tough time since the fateful decision to IPO in 1999; perhaps the events of 2012 will put an end to all that.
In June, Eircom exited examinership with new capital and shareholders in place. The examinership process removed €1.7bn worth of debt from Eircom's balance sheet.
In October, the company revealed plans to cut 2,000 workers within two years.
This morning, the company revenues for its first quarter ending 30 September declined by €26m to €363m. The company also announced this morning that operating costs were €160m for the quarter, a 4pc improvement on the previous year. EBITDA decreased by €14m on the prior year to €124m for the quarter, down 10pc on the same period in 2011.
When Eircom exited the examinership process it said it would be embarking on a five-year business plan that would include a €1bn home-fibre broadband rollout. This morning Eircom revealed 150,000 homes have already been passed and revealed the locations of the 300,000 homes and businesses that will be passed in the final stages of the fibre rollout up to 2014.
Between spring and summer 2013, the first up to 70Mbps fibre services, as well as the first 4G mobile services from Eircom, will launch into the marketplace.
A new dawn at Eircom?
I point out that the first LTE (4G) and fibre-based (VDSL) services will debut roughly around the same time and ask how they will dovetail.
Hribar said the first services to emerge will be fibre at 50Mbps. “What we’re providing is a well-engineered service off of VDSL, we’re employing vectoring and we’d expect to see about 70Mbps over 70pc of the base, it will evolve into that over time. The first services out will be 50Mbps and we have pre-planned upgrades to move with the vectoring technology.”
Moat said: “I think the key thing is that we’ve got this always connected strategy. We’re going to be the only player in the Irish market with mobile and fixed assets of this type at our disposal and the combination of the two is going to provide the most compelling network experience for Irish consumers.”
Eircom clearly wants to bring the battle to UPC in terms of bundled offers in largely populated areas.
“We really are striving to create a new space called the quad play,” Hribar explained. “You see triple play out there at the moment, but without mobile. Because we have the structure for fixed and mobile and we’ve got the capability to offer a bundle of TV, broadband plus wireless and fixed voice and data and we have the infrastructure base to let us be competitive in that space and you’ll see us go out with a real quad play offer that delivers real value to the consumer.”
Both Hribar and Moat are seasoned telecoms executives. Moat joins from senior financial and leadership roles at T-Mobile in the UK. For Hribar it is a return to Eircom as he previously held the role of managing director of wholesale between 2002 and 2004.
I ask him what differences exist between the Eircom of 2004 and the Eircom of 2012.
“What has changed since I was here eight years ago? Vision. The vision we have for Eircom is a fully-invested company. We intend to have the most modern, comprehensive, ubiquitous fixed and mobile infrastructure in the country. We’re going to be on fibre to the curb, the latest technology for 4G, we’re going to have excellent in-building penetration for UMTS 900 services and we’re going to have a TV product that’s complementary to all of them.
“The Eircom that I see is a fully-invested, best-in-class, fixed mobile infrastructure, efficient, lean, quick. We’re never going to be a Silicon Valley kind of place but we’re going to be very much in the top half of all the telecoms operators in Europe.
“And finally, we are putting some real teeth into customer focus. We are strongly implementing a customer experience programme based on net promoter scores; measurements where we survey customers and engage with them on a weekly and monthly basis. We find out what they think of us and we measure and track and report it and most importantly we will act on those areas where they say we are failing to deliver what they want. That way we continuously invest over time.”
Wholesale reform at Eircom
One of the biggest changes, Hribar says, will be the company’s focus on wholesale.
“We have embraced a concept called ‘wholesale reform’ and we have a standalone wholesale division that is outwardly faced to the other operators in Ireland. We strive to deliver them with the reports on how we’re performing so they can measure us and how well we are doing and we prepare action plans on how we are going to get better and we listen to them in terms of what they want us to deliver.
“We have a strong pipeline of sales in that division in terms of as we look out of over €70m of opportunity of qualified prospects so we really embrace the idea of wholesale reform and supporting the other operators and making sure they are successful and we look at them more as a distribution channel than as competitors.”
Moat says that the current financial performance with revenues declining 7pc and EBITDA falling 10pc indicates that costs are not falling as fast as revenues and a core focus for him will be achieving cost savings but also keeping cashflow in line with the investment programme.
“Although our results have declined year on year, they are nevertheless ahead of projections which were contained in the plan that was put together when we exited examinership and it is definitely the case that our financial position is stabilising. We intend to improve our profitability year-on-year going forward. Revenue may still be under pressure and may take longer to pick up but generally speaking you can say we are on track.
“The investments we are making in fibre and 4G is going to provide a far increased capability to handle the extrapolating demands for data we have seen and which will continue into the future. We are positioning ourselves to take advantage of trends.”
Hribar points out that a key aspect of Eircom’s future revenue will be the provision of fibre to the base station and backhaul for other operators.
“We’ve got the best fibre infrastructure in Ireland and the capability to blend the fibre with the backbone and with LTE and offer that fibre to all the other operators in the country will be a profitable product for us
“We are also deploying the most extensive Wi-Fi network in the country so we have around 1,500 public hotspots we use to complement our mobile network,” he said.
Eircom to go to war with UPC and Sky
If Eircom becomes a quadplay provider offering TV along with fixed and wireless broadband and mobile services it will put it in an interesting competitive space. UPC is already active in terms of TV, broadband and phone services and early next year Sky will enter the broadband market. Right now 75pc of the TV market in Ireland is served by both Sky and UPC.
“There’s a niche that we see and it’s in between the lower-end digital channels offered to the public today and below where Sky and UPC are competing today. We’ve really profiled the channels that our customers in Ireland are really looking for and we’re acquiring rights to those channels and expect to deliver them at an attractive price point as a complementary service to our broadband offering.
“It will be part of the bundle. It will initially be offered over the fibre products but over time also the capability to deliver that over our mobile products and LTE network.
“We’re also building a platform right now that is friendly to over-the-top video delivery and that’s where we see video going in the longer term with services like Netflix or Hulu or Amazon that consumers want to get over the web.
A key aspect, Hribar says, will be the user experience and making it easier and more attractive to access the content than it is currently served.
“We’ll have fibre out in the spring, enhanced UMTS and LTE around mid-year and TV in the third calendar quarter of this year. By September we’ll have the full suite of products in the market. Things are going to get very interesting,” Hribar says.