Soaring consumer debt warning for Irish telcos

14 Feb 2007

Consumer debt levels in the telecoms sector in Ireland are the fastest growing of any industry sector over the past 10 years, a finance firm responsible for managing the debts of 95pc of Ireland’s telecoms firms has said.

Nordic credit management and collection services firm Intrum Justitia, which lists Vodafone, O2, Meteor and Smart among its clients, has entered into a joint venture with Goldman Sachs to invest in purchasing portfolios of debt worth €200m from Irish businesses over the next 12 months.

Last year the firm received 250,000 instructions from a number of companies operating in Ireland and this figure represents 5pc of the Irish population.

In terms of the Irish telecoms market, the average size of consumer debt in the sector is in the region of €300.

Intrum Justitia said it expects this figure to increase and it has been identified as a potential hindrance curbing the growth of start-ups and companies wishing to enter the Irish telecoms market.

This is especially severe as Ireland continues to be one of the worst bad debt payers in Europe, according to the latest figures from the European Payment Index (EPI).

The cost to Irish businesses of late payment alone in 2006 was €11.6m.

Intrum Justitia said that because the levels of consumer lending and debt continue to soar in Ireland, the company is preparing for dramatic growth in the sale of debt by Ireland’s top companies.

The company handles 95pc of all outsourced credit management for both fixed-line and mobile in the buoyant telecom sector.

“Information from our ongoing research programme illustrates that late payment performance from Irish consumers is the worst in Europe,” explained Nick Biggam, managing director of Intrum Justitia Ireland.

“This trend appears to be continuing downward for the foreseeable future. Many major business-to-consumer sales organisations are prepared to incorporate debt sale into their overall credit management strategy, just as many of our clients across European markets already do. Our firm currently handles €1.3bn of purchase debt.”

Conversely, efforts by telecom firms to ensure customers pay on time have raised the ire of one of Ireland’s leading consumer representative bodies.

Last week the Consumers Association of Ireland hit out at a decision by cable and broadband player UPC to insist that its customers pay only by direct debit or suffer penalty charges.

Dermott Jewell, chief executive of the Consumers Association of Ireland, said this serves only to the benefit of the credit control capabilities and profit margins of this business.

“It ignores that consideration of choice even when a consumer is paying their bill on time,” Jewell said.

“It now suggests the introduction of a tiered system of consumer eligibility or waiver regardless of payment mode. It makes no consideration of the fact that payment is made in advance of receipt of the service. It forces consumers to open a bank account and incur transaction charges,” Jewell stated.

By John Kennedy