Eircom presents business plan to investors – key to €3.7bn debt restructure

29 Jul 2011

Incumbent operator Eircom has taken a step closer to achieving the €3.65bn debt restructure it needs to reposition the company after management presented a business plan, that involves rolling fibre to 1m premises, to lenders at a meeting in London this morning.

Presenting the five-year business plan to shareholders is another necessary step Eircom needs to take in order to achieve the funding. Eircom shareholders are now reviewing the plan.

According to a spokesman, shareholders are reviewing possible alternatives for restructuring the company’s €3.7bn debt. More than 100 banks and funds that hold the most senior debt attended the meeting.

“This is one step closer to securing our future,” the spokesman said.

The business plan presented by Eircom notes the continuing difficulties in the Irish economy, including emigration and high unemployment, and the challenges caused by PSTN line losses and falling mobile revenues per user. The plan has been independently reviewed by Ernst & Young as part of the process.

The company’s difficulties are being exacerbated by Eircom’s uncompetitive cost structure compared with industry peers.

Eircom’s five-year business plan

The business plan envisages the rollout of high-speed broadband and the development of fixed, mobile, broadband and TV services, a drive for increased mobile market share, an enhanced and open wholesale platform and improved business offerings, “all underpinned by further cost reductions.”

It includes multi-year rollout of a fibre network to about 1m homes and business premises, improved mobile coverage, an enhanced Wi-Fi network and more flexible and responsive IT systems.

Looking ahead at the rest of the year, Eircom said unaudited results for the fourth quarter show increased financial health in the fixed line business due to increases in fixed line prices, procurement savings and an 18-month 10pc pay cost reduction.

It expects fourth EBITDA (earnings before interest, taxes, depreciation and amortisation) to be around the same level as the third quarter.

Eircom’s mobile divisions are pointing to an increase in post-paid handsets driven by the launch of BlackBerry and iPhone, but pointed to a decrease in prepaid handsets. It expects a lower EBIDTA in the fourth quarter from mobile.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years