Eircom IPO could be twice oversubscribed

dahamsta

Belgacom and Eircom IPOs getting set to woo investors

Tuesday March 16th 2004

BELGACOM and Eircom, the top telecoms carriers in Belgium and Ireland, are likely to price their market listings in the middle to the high end of their respective ranges this week after wooing investors with a solid if unremarkable story.

Fund managers said they expected the listings of the two companies, which are selling shares worth around €4.2bn combined this week, to go "reasonably well" after bankers set price ranges below initial expectations.

"Short term, I think (Eircom) is very attractive," said Philip Carney, fund manager at one of Ireland's top five institutional investors, Hibernian Investment Managers.

"It's not a very exciting story so you've got to make it attractive on the yield basis. (But) I think it's priced to go."

Investors said the planned sale of 39pc of Belgacom, which is expected to be one of the largest European listings of 2004, was expected to have won enough market interest to prompt the group to set a price towards the higher end of its range. "We're hoping for the low end, but we're fearing for the higher end," said Johan Reybroeck, a fund manager at Antwerp-based Bank Corluy.

Despite a rebound in telecoms shares after a three-year slump, Belgacom and Eircom are taking few chances.

The two companies offer limited prospects for growth and they announced discounted price ranges for their flotation before embarking on investor roadshows last week.

State-controlled Belgacom, whose foreign investors are keen to sell and refocus at home, has priced its shares at €23-26.5 per share, valuing the group at €8.1-9.3bn.

It will announce a final price on Sunday and make its long-awaited market debut on Monday.

Eircom is pricing the shares of 70pc of the company at €1.48-1.75 per share, or €1.107-1.258bn.

It will settle on a final price on Thursday and officially return to the stock market on Friday.

© Irish Independent

dahamsta

Interest in Eircom strong ahead of IPO
From:ireland.com
Tuesday, 16th March, 2004

Eircom is continuing roadshows in Europe ahead of the initial public offering of its shares later this week.

Indications so far are that the offer will be more than twice oversubscribed, with strong interest reported in presentations in the US and to domestic investors.

The pricing of the shares will be decided by the company and its advisers on Thursday, with the grey market - or trading in advance of its official listing - due to commence on Friday. The company has indicated that the shares will be floated at a price of between €1.48 and €1.75.

The interest from investors has led some market sources to speculate that the float will take place somewhere in the middle of this range, or slightly higher. However, this decision will not be made by the company until all the roadshows are completed and nervous market conditions in the wake of the Madrid bombings may lead to some caution in striking the final price.

The main attraction for institutional investors is the strong yield being promised on the shares. At a price in the middle of the indicated range - around €1.62 - the yield in the first year would be an attractive 6.8 per cent.

However many private investors, who had to subscribe €40,000 or more to participate, will be hoping for an initial "bounce" in the share price, which would allow them to take some profits.

Eircom will raise about €830 million from the flotation, with €300 million in fresh equity and the balance going to existing shareholders.

Belgacom, the Belgian telecoms operator, will join the market on March 22nd, offering a lower yield - around 5.5 per cent at the mid-point of its indicative price range - but with existing exposure to the higher growth mobile market.

Investors were reported as saying yesterday that the planned sale of 39 per cent of Belgacom, which is expected to be one of the largest European listings of 2004, was expected to have won enough market interest to prompt the group to set a price towards the higher end of its range.

Mr_Man

Since the company is in a position where it can expect limited growth (it already controls most of the fixed line market) and it doesn't appear to have the readies to buy into the mobile market at this stage, the float it likely to attract those institutions who require a steady dividend stream. Now for this to materialize (and based on the figures from the SBP) capex will have to be tightly controlled and overheads reduced.

Now since the main overhead is labour, and the union controls around 30% of the firm it is unlikely that there will be any dramatic improvement on that front. Most of the other assets which could be sold have already been disposed off by the vulture capitalists. If capex is constrained then the likelyhood is that the state of the access network will continue to degrade, espcially in rural areas where the replacement costs are higher.

If €ircom fail to maintain the dividend levels promised then the share price will slump and it will be harder for the company to raise funds in the market, and their cost of borrowing will rise. Overall therefore not an optimistic outlook for the nations telecoms infrastructure - unless the company can find a CEO who has the imagination to drive higher revenues from the existing plant by offering better services. The recent track record in this area has not been good,

Just my 2c

M.

tomk

Originally posted by Mr_Man
- unless the company can find a CEO who has the imagination to drive higher revenues from the existing plant by offering better services.

Do you not think it will take a lot more than imagination to wring better services out of the mangled wiring known as €ircon's access network - assuming there's a willingness to do so in the first place?

Mr_Man

Even with the shoddy state of the network it would still be possible for €ircom to get more return from it by shifting from viewing everything as a threat to their voice revenues and embracing the new reality of data based services. To do this requires imagination, and bravery, both in short supply at €ircom.

M.