Eircom revenues down 7pc – telco accelerates job cuts

27 May 2010

By the end of 2010, upgraded broadband speeds starting at 8Mbps will be available to 1 million households, CEO Paul Donovan promised. He said the rebuilding of Eircom is under way and the company is accelerating its 2011 headcount reduction target.

Group revenue at Eircom for the first quarter came in at €455m, down 7pc on the previous year. Fixed-line revenues were down 7pc and mobile revenue was down 5pc.

Adjusted group EBITDA (earnings before interest, taxes, depreciation and amortisation) was down 4pc to €170m.

Eircom Group’s operating costs were down 8pc, reflecting reduced labour costs and non-pay expenses.

Capital expenditure in the past nine months was €218m with spending committed to fixed and mobile next-generation networks.

Cash on hand at the incumbent telecoms operator at the end of the first quarter was €265m.

Rebuilding Eircom

“Building upon the shareholder stability achieved with the arrival of STT as a strategic shareholder in January, we are continuing to actively rebuild Eircom for the future,” Donovan explained.

“In March, we confirmed the far-reaching pension benefit changes agreed with our trade unions. Our continued relentless focus on cost reductions has delivered material improvements in our ability to compete. The company retains a strong cash balance and positive headroom in servicing its debt.

“However, the ongoing economic, competitive and regulatory environment continues to put pressure on the group’s revenues and EBITDA and, as a result, further cost reductions will be required. We have moved to accelerate the achievement of our March 2011 headcount reduction target,” Donovan said.

In recent weeks, Eircom said 1,200 workers would be made redundant over the next two years in a move that would reduce costs by €130m a year.

The pension proposal the company reached with the Trade Union Alliance, which limits the future growth of pensionable pay and a floor under Eircom’s contributions has helped in eliminating the €407m deficit and the fund showed a small surplus at the end of March.

Next-generation infrastructure

Donovan said the company is powering ahead with its plans to deploy next-generation infrastructure.

“During the quarter, the company took two important steps on its road map for the development of improved broadband services in Ireland, expanding our DSL broadband portfolio to offer customers improved speed and performance both at the wholesale and retail levels.

“In January, we launched a 24Mb product for the residential market that is now available to more than 500,000 households. This was followed by the launch of our Next Generation Broadband (NGB) product in March, underpinned by the company’s Next Generation Network. NGB provides improved performance, removing congestion during peak periods and allowing speeds of up to 8Mb. It will be available to 1 million households by the end of 2010.”

He said that a wholesale version of Next Generation Broadband has been introduced with price discounts of up to 60pc.

He added that a new suite of high bandwidth ethernet services to increase backhaul and access capacity is available to other operators.

“In mobile, Meteor exclusively launched the HTC Hero handset in Ireland to drive smartphone take-up across our customer base. We also launched our Meteor ‘Smart Plans’ which offer up to 250Mb of free mobile internet access. Meteor is the first and only provider in Ireland to offer free mobile internet access to pre-pay customers.”

Donovan said he was disappointed that as a 65pc shareholder in the One Vision Consortium, the company was unable to agree to commercial terms for the rollout of a commercial digital terrestrial television (DTT) in this country.

“With the right circumstances, Eircom remains optimistic for the prospects of commercial DTT in Ireland and we await the decisions of the Broadcast Authority of Ireland as it reviews next steps in the process,” he concluded.

By John Kennedy

Photo: Eircom CEO Paul Donovan

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