Eircom targets 500,000 broadband users by 2007

24 Nov 2004

Eircom has paid out a dividend to shareholders based on achieving a target of 83,000 broadband subscribers. In a statement this morning, Eircom CEO Dr Philip Nolan said that the company is six weeks ahead of target and is now setting a further ambitious target of having some 500,000 broadband subscribers by December 2007. He also reaffirmed Eircom’s plans to re-enter the mobile market.

In its second quarter results this morning, Eircom said it will pay a half-year dividend of five cents per share, almost half the 11 cent per share it has pledged to return to shareholders this year.

Last week the company attracted criticism from lobby groups such as IrelandOffline when it advertised it had 100,000 broadband customers at an international friendly between Ireland and Croatia at Landsdowne Road.

This morning, however, the company said that broadband momentum had increased with some 83,000 users on its broadband services at the end of September. Overall, there are some 102,000 homes currently accessing broadband through Eircom’s infrastructure but the balance is understood to have been acquired based on wholesale arrangements with players such as Esat BT and Smart Telecom.

In figures released by the company this morning, in the half year the company had an operating profit of €128m, a 52pc increase before restructuring costs and exceptional operating costs were factored in. In the most recent quarter the company claimed an operating profit before restructuring of €63m, up 29pc, and an operating margin of 16pc.

Eircom also claimed that in the first six months it had made €98m worth of capital investment, which it says reaffirms its target of €200m for the year.

Eircom’s results were somewhat marred by the departure of its director in charge of networks and wholesale, Herb Hribar, who will be returning the US. Hribar will be replaced by an executive from its wholesale division, Fiona Tierney.

Nolan said that this morning’s results highlight Eircom’s transition from a traditional telephony company towards a digital, converged business. “They also show the resilience of the business, the clarity of our strategy, and management’s determination to deliver to plan.”

Nolan told shareholders: “Following the IPO (initial public offering) of the company earlier this year we are delivering our business targets and have grown profitability (before restructuring programme costs) significantly both at the EBITDA and operating profit levels. This has been driven primarily through lower operating costs and improved gross margin.

“As we said at the time of our return to the public markets, broadband is vital to the future of our business. We have now achieved our target (set in June 2003) of 100,000 broadband customers six weeks ahead of schedule. The growth rate of broadband customers is now one of the fastest for an incumbent telco in Europe, as we are connecting over three thousand per week.

“Today we are announcing a new target of 500,000 broadband customers by December 2007. This is an ambitious target by any measure but given our current momentum and with the appropriate support from Government and the Commission for Communications Regulation it is achievable, especially since Ireland is one of Europe’s fastest-growing economies. Success would transform the broadband landscape in Ireland and represents an important step towards building Eircom’s future as a digital communications company.

“Our determination towards the final part of our strategy, which is to re-enter the mobile market and bring competition and value to the mobile customer, remains undiminished. In this regard we look forward to the outcome of the Regulator’s consultation on the market in the coming weeks,” Nolan added.

By John Kennedy