Will STT takeover of Eircom bring stability to Irish telecoms?

14 Sep 2009

While welcoming the the news that Eircom’s owners have accepted terms for a takeover offer from STT Communications, a subsidiary of Singapore Technologies Telemedia, many commentators hope the acquisition will bring some stability to Ireland’s turbulent telecoms sector.

The company said in a statement this morning that the board of Eircom Holdings, formerly Babcock & Brown, has agreed to terms with STT for the acquisition of the company in partnership with the Employee Share Ownership Trust (ESOT) which owns 35pc of the operator.

The board of Eircom Holdings is recommending to shareholders that they accept the offer, which will be voted on at a meeting in Sydney in December.

This will be the fifth change of ownership that Eircom, Ireland’s largest telecoms operator, will have undergone in the last 10 years.

Overwhelmingly, commentators have expressed a view that the agreement of terms between the Australian owner of Eircom and STT Communications will only be a positive move if it results in an improvement in the delivery of services to Irish consumers.

But commentators have also expressed caution and hope the move will finally result in a more competitive Irish telecoms marketplace, which will be fundamental for future growth and economic recovery.

“We need to see stability in the sector, and a greater level of investment in telecommunications infrastructure as a result of this deal,” said Labour TD Liz McManus. “There will have been five changes of ownership of Eircom since it was privatised in 1999 and as a result, we have had an underfunded and deficient infrastructure across the country, and this is a problem that will need to be tackled.

“In particular, we need to see broadband rollout across the country. Deficiencies in broadband have been highlighted many times as a serious block to our competitiveness. We also need to see a real effort to building ‘next generation’ networks if we are going to have a chance of developing desperately needed jobs.”

McManus said it is important that a clear strategy will be published by the new owner to show its plans for dealing with the major technical and management issues that have dogged Eircom for so long.

“It is vital that our telecom infrastructure is developed rapidly and it is important that this new takeover, once it is finalised, will deliver real improvements and deal with the digital divide that is so evident across the country,” McManus said.

Magnet Telecoms has unbundled more than 40 telecoms exchanges around Ireland and has long argued for a more level playing field in Irish telecoms. CEO Mark Kellett said the change of ownership should be seized upon as an opportunity to make the market competitive.

“Magnet believes this to be an opportunity for ComReg to act more assertively towards Eircom with regards to ongoing regulatory consultations. Eircom’s previous owners followed a policy of legal attrition when it came to ComReg’s efforts to regulate the market.

“To date, this has stymied market reform and limited other telecommunications companies’ ability to invest in our national network. This will be the fifth time that ComReg has been granted the chance to engage with a new owner and it is our hope that they immediately initiate a fruitful dialogue with STT.

“The first test to see if this purchase is just another equity play or a move of value to Ireland is in how Eircom’s new owners will act on ComReg’s recent decision to reduce LLU line share charges.

“Eircom currently has the right to appeal, however, were Eircom to accept ComReg’s decision on this and other planned reductions it would suggest that STT are not simply looking to milk what’s left of the Eircom cash cow.”

“STT must choose between continuing Eircom’s efforts to expend time and resources trying to maintain a near monopoly, or working with Comreg and alternative operators such as Magnet in developing the communications competition and infrastructure essential to our country’s future growth,” Kellett said.

Business group Chambers Ireland’s Digital Policy Council welcomed the takeover.

“Ireland needs continual and significant investment in broadband rollout across the country,” Claire Cunningham, digital policy council chair, said. “A vibrant Eircom competing with other fixed-line, wireless and cable broadband operators can deliver this goal. This deal will not only facilitate this but also brings clarity to the ownership speculation that has been in place for the past number of months.”

“If this takeover is successful, then Eircom’s new owner will bring an interesting perspective to competition issues in Ireland given that it is a non-incumbent challenger brand in Singapore.

“We look forward to indications of STT’s appetite for investment in the context of decisions around open access, shared infrastructure and building next generation networks.

“Another crucial decision that the new owners will face will be deciding when to abandon the copperwire infrastructure in favour of a blended fibre optic plus wireless network in the future,” Cunningham concluded.

By John Kennedy

Photo: Eircom’s change of ownership should be grasped as a chance to make the telecoms market competitive, Magnet Telecoms CEO Mark Kellett said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years