Eircom’s revenues fall 11pc due to economic and competitive pressures

27 May 2011

Eircom’s third quarter revenues fell by 11pc from the previous year due to “continued pressures” on both its fixed and mobile segments.

Its revenues for the quarter ending 31 March reached €407m, down from €455m from the same quarter last year.

Operational costs for the quarter were reduced by 13pc to €247m. Its adjusted EBITDA declined by 6pc to €160m.

For its fixed-line segment, revenues fell by 9pc but EBITDA increased by 2pc compared to the same quarter last year.

For its eMobile and Meteor networks, the group added 14,000 billpay customers which was offset by a reduction of 22,000 lower-value prepay customers, resulting in a net loss of 8,000 customers.

Its total mobile customers for both brands stood at 1,044,000, 2pc lower than last year. Revenues fell by 17pc compared to last year, due to fewer customers, reduced average revenue per users and reduced mobile termination rates.

Trading challenges

Ireland’s economic troubles and strong competition in the market were said to be the cause of their revenue drop.

“Despite sustained progress to reduce operational costs, the underlying fundamentals of the Irish economy and intense competition continue to create trading challenges for the Group across both our fixed and mobile segments,” said Paul Donovan, CEO of Eircom Group.

“This quarter demonstrated the impact of additional personal taxation changes on our customers, as well as the impact of regulation on the business in the form of reduced mobile termination rates.

“Our recent union collective agreement is another important step towards securing the future of the Group and the introduction of exit schemes will help to further reduce pay costs. Despite these steps, the group is likely to see an accelerating decline in EBITDA in the coming 12 months,” said Donovan.

Eircom also noted the group is likely to breach its financial covenants with its lenders within the next three months. It is in discussions with shareholders and will hold discussions with relevant lenders on their Group’s financial position and on any covenant breach.

Cost reductions

Eircom noted its “transformation programme” was ongoing, with a focus to reduce costs and improve services. The company reached an agreement with the Trade Union Aliiance in March 2011 in order to reach its cost savings target of €90m by 2013.

The first phase will be implemented from 30 May, which will include a 10pc reduction in working hours in exchange for a 10pc reduction in pay. Eircom expects this will reduce pay costs by more than €20m over the next 12 months. The group has also brought in exit schemes for employees, such as early retirement schemes.