BT slows capex, awaits
LLU legislation

10 Nov 2005

The CEO of Ireland’s second-largest telecoms company BT Ireland has said the company intends to make only a basic level of capital expenditure in its broadband infrastructure until broadband legislation promised by Communications Minister Noel Dempsey TD emerges. The company had intended to spend €200m upgrading its network.

Speaking at the company’s half-year results for the Irish market, BT Ireland chief executive Danny McLoughlin reiterated his disappointment at Eircom’s recent market requirement document but said he was encouraged by comments by Minister Dempsey at the recent Telecoms Internet Federation conference promising to bring in legislation to speed up the process of local-loop unbundling (LLU).

McLoughlin said that in order to protect the company’s investment going forward it is imperative to await the legislation. “We will only make the basic level of capital expenditure, but this could be accelerated once we know what’s going to happen.”

In the six months up to 30 September, McLaughlin said that the company invested €14m in capital expenditure. BT Ireland chief financial officer Andrew Tackaberry said that for the full year the company will more than likely invest €36m in capex. BT has earmarked some €200m to invest in upgrading its Irish network as part of its 21st Century Network strategy.

For the six months BT reported a 27pc increase in turnover from €173m to €220m. Earnings before interest, taxes, depreciation and amortization (EBITDA) – a standard indicator of telecoms firms’ performance calculated as revenue minus expenses – came to €12m for the six months. Earlier today, BT in the UK reported revenues of £9.6bn sterling and profits of £1.1bn sterling for the past six months and revealed that there are now some 6.2 million broadband users in the UK.

Tackaberry revealed that the growth was driven by strong gains in the company’s wholesale business – with revenues of €102m for the half year – and major deals such as the build-out of Hutchison’s 3G network in Ireland as part of a €100m contract.

BT Ireland’s chief operating officer Mike Maloney revealed that the company’s wholesale voice and data business was up 22pc year on year. Pointing to the acquisition of CARA last week, which follows the acquisition of BIC Systems a year ago, Maloney said the company sees a lot of upside in providing ICT systems and services to the SME and corporate markets in Ireland. “This year we will be the largest distributor of Cisco IP solutions on the island.”

Commenting on the exponential growth enjoyed by BT Ireland’s switcheless reseller business in a thinly veiled hint to Eircom, Maloney said: “If we can view wholesale as a business rather than a necessary evil you can recognise the market potential. We have developed a €40m business within two years.”

McLoughlin said the company was disappointed with Eircom’s response to the industry’s requests for automated LLU and number portability.

“In terms of broadband,” McLoughlin said, “Ireland is at the bottom of the league. Ireland has been overtaken by Romania and is just ahead of Greece. I do not detect a sense of urgency in resolving Ireland’s broadband situation and this will harm Ireland’s economy in the long term.

“I am encouraged by Minister Dempsey’s comments when he said that the Government may introduce legislation on LLU. My question is when? We are waiting to see what happens.

“We have unbundled 40 exchanges so far. Other than that our only option at the moment is to resell a bitstream product that does not allow us to deliver innovative products. The real benefits of broadband will come in Ireland when real LLU happens. Until then we can only make the basic level of capex,” McLoughlin said.

By John Kennedy