Eircom sale may unlock investment

4 Nov 2005

The potential sale of Eircom to European telecoms giant SwissCom for €3b could unlock much needed investment in Ireland’s telecoms infrastructure, said the company’s biggest customer and its biggest competitor BT Ireland.

Speaking to siliconrepublic.com on the occasion of BT Ireland acquiring IT services firm Cara Group for an undisclosed sum yesterday, its CEO Danny McLaughlin said the ongoing consolidation in the telecoms sector may actually be a good thing for the sector internationally.

Consolidation is a steady theme of telecoms at present with NTL Ireland in the process of being acquired by Liberty Global, Meteor in the process of being acquired by Eircom and earlier this week O2 accepted a €26bn acquisition bid from Telefonica.

“If SwissCom buys Eircom,” McLaughlin observes, “it means there won’t be an indigenous Irish telecoms operator any more.”

He continues: “As well as being a competitor, I am one of Eircom’s largest customers and I would like to make sure that Eircom keeps its eye on the ball for delivering its services and that management doesn’t get too distracted. That won’t be easy. The potential acquisition is part of a larger global consolidation and instead of being worried I think it is very exciting.

“It effectively shakes out excess capacity in the telecoms industry and hopefully that means the entities that remain will get back on the investment ladder. In this regard I believe Eircom is suffering from a lack of investment and an acquisition of the company may mean investment in infrastructure.”

McLaughlin’s argument is not without merit. In NTL Ireland’s case, if the Competition Authority approves the takeover by Liberty Global, the acquiring firm is expected to plough in €200m in upgrading the company’s aging infrastructure.

“Overall, an acquisition of the company may help to loosen up the market faster in Ireland. That would be my hope,” McLaughlin said.

On Wednesday Eircom, without naming the company, confirmed that it had received a preliminary approach “that may or may not lead to an offer being made for the company”.

Speculation that SwissCom may be the potential acquirer sent Eircom’s shares soaring 15pc on Wednesday from €2.09 to €2.40. By close of business last night Eircom’s share price on the Irish Stock Exchange stood at €2.30 a share.

By John Kennedy