Eircom profits but mobile progress is slow

27 May 2005

In its first complete set of annual results since its return to the stock market, incumbent operator Eircom this morning reported an operating profit increase of 73pc from €142m and €246m and said it conducted €209m of capital investment during the year, of which 60pc was dedicated to DSL broadband rollout.

Turnover for the 2004/2005 year was down 2pc to €1.60bn from €1.62bn a year ago. Nevertheless, the company boasted a 1pc increase in gross profit to €1.22bn.

In what can be regarded as solid annual results, the company reported adjusted earnings before interest, taxes, depreciation and amortization of €615m, up 2pc on the year.

Operating profit before restructuring programme costs and operating charges was up 73pc from €142m to €246m. The company reported a 15pc improvement in its operating margin profit.

Eircom said that it reduced its headcount by 668 employees to a year-end total of 7,275 and added that it was well on track to achieve a target level of 7,000 employees by 2008.

The company said that broadband DSL customers increased to 128,000 customers by the end of March, compared with 39,000 in March 2004. Latest figures, suggest that DSL customers stand at over 140,000.

Based on the results the company plans on giving a dividend of six cents, giving a total of 11 cents per share for the full year.

Commenting on the results, Eircom’s CEO Dr Philip Nolan (pictured) said: “Our capital spend has been on plan at €209 million and the company’s cash generation remains strong.

“A key strategic objective is to grow broadband and our performance in the past year means we are now well advanced towards our strategic goal to transition from a traditional telephone company into a digital converged business. We have increased our broadband base from 39,000 to 128,000 during the financial year and today the figure stands at over 140,000. The investment in customer acquisition will require greater price stimulation than previously assumed, and we are committed to further innovation in product, pricing and promotions to deliver our stated goal to achieve 500,000 users by December 2007,” Dr Nolan said.

At present all eyes are on Eircom and its imminent return to the mobile market, which could take the form of an outright acquisition of Meteor or the shape of a mobile virtual network operator (MVNO) play. However, Dr Nolan was giving very little away on Eircom’s plans except to suggest that the company is considering every available option.

He said: “While we are committed to mobile re-entry progress has been slower than anticipated. We have consistently stated that our re-entry must be achieved on terms which are commercially sensible to us and we remain engaged on all aspects of potential re-entry routes.”

In terms of broadband rollout, Dr Nolan speaking on RTE’s Morning Ireland programme this morning said that by the end of this year the company intends to have covered over 90pc of the population with broadband availability. “We want to work with industry and Government to get the final 10pc,” Dr Nolan said, adding that he would be looking for the Government to support the industry financially in this regard in a similar manner to Northern Ireland, where broadband rollout is near 100pc and Scotland where the Scottish Executive provided some £45m sterling to the communications industry.

And on the subject of Eircom’s return to mobile Dr Nolan added: “We are fully committed to it and we will be back.”

By John Kennedy