Eircom Mobile

machalla

Noticed this on ENN

http://www.enn.ie/frontpage/news-9414633.html

Eircom is apparently whinging about the burden of regulation and telling Comreg to ease fixed line regulation and increase mobile regulation to allow them into the market.

SkepticOne

The Irish Times also carries an interview with Eircom Chief Executive Philip Nolan, who says that Eircom is ready and able to get back into the mobile market but hasn't been able to agree a deal with either big mobile network.

LOL. The reason they got out was because they sold their mobile network, Eircell, to Vodafone for large amounts of cash. If Vodafone were required to sell wholesale to Eircom at the time of that deal, Eircom would not have had such a large amount.

One day they will realise that the can't have it both ways.

watty

Ha ha ha ha ha....

IF the carpet baggers could have sold off the Exchanges too...

Pity we might be better off if they had.

viking

Eircom suffers regulation blues as mobile beckons

It's been a long day for Philip Nolan. The chief executive of Eircom has been up since 5 a.m. for a day of briefings, meetings and conference calls about the firm's first set of results since returning to the market in March, writes John McManus

By the time he got to the Westin Hotel in Dublin's city centre some 11 hours later he is in no mood for chit chat.

A question about whether Eircom can continue to squeeze costs in order to maintain dividends gets quickly turned on its head. It's clear Mr Nolan is here to talk about regulation.

"People say we can't squeeze any more costs out? That's interesting, because the regulator \ keeps telling us we are inefficient and disallowing costs. It seems to me that there is a paradox there somewhere," he says.

A tour d'horizon of the regulatory regime follows.

It is clear that Mr Nolan's plans for Eircom post-IPO (initial public offering) will - to a significant extent - stand or fall on what happens in the regulatory arena.

If this week's results were about showing the market that Eircom can sustain its generous dividends, then next year's (and following years) will be about proving he can develop the business.

And this is where regulation will prove crucial. As Mr Nolan sees it, Eircom is in a double bind. It is being forced to open up its fixed-line network to competition by the regulator at prices it believes are not commercial. But the networks that it needs access to if it is to grow - Vodafone's and O2's - are not regulated.

Re-entering the mobile market as a virtual operator is the most straightforward route to growth for Eircom.

But the company has not been able to reach a commercial agreement with either of the big mobile networks.

"We can get back into mobile and have the ability to get back in at scale. We sold 100,000 hands-free sets last year and can do the same for mobile. We just need a commercial deal to get access to the networks," he says.

It might be time for the regulator to get involved, says Mr Nolan.

The regulator should either loosen regulation of the fixed-line business or impose regulation on mobile, says Mr Nolan.

A lighter touch in the fixed-line area would also dramatically improve Eircom's opportunities to drive revenues. The company has pinned a lot of hope on broadband and is marketing it heavily at present.

But its current promotional offer of a three-month free trial has been matched by UTV Internet and Esat BT, which have access to Eircom broadband capacity at attractive rates under a very tightly regulated agreement.

The Government's plans to construct its own broadband network is not helpful either, according to Mr Nolan.

But it is not surprising, given the company's apparent reluctance to invest in this economically important area during the two years before the IPO when it was owned by two US venture capital funds, Providence Equity Partners and Soros Private Equity.

The delay was about more than just the venture capital funds squeezing capital expenditure, according to Mr Nolan. Several things had to happen before Eircom could proceed.

A legal standoff with the regulator about the price that Eircom would charge others to access the broadband network had to be resolved and the tariff structure rebalanced.

Line rental cost had to go up from the low levels set "for social reasons" when Eircom was in State ownership before its original flotation in 1999, he said. Without rebalancing, the economic case for investing could not be made, according to Nolan.

There was also a certain lack of realism in Government circles about what sort of broadband network was viable.

Advisory groups were talking in terms of 5 megabyte fibre connections to every home, while Eircom favoured the upgrading of existing copper wire network - a view that Mr Nolan believes has been vindicated.

"We will get more and more down copper, but it has taken Government a long time to realise this."

He is confident broadband will prove an engine of growth.

"We went to see Belgacom, which has the highest penetration in Europe - 27 per cent. They said you have got to get people to try it out. Their price point is the same as ours - €39.99."

Further out, Eircom sees growth potential in fixed-mobile convergence but not using the bluetooth technology being rolled out by BT and Vodafone in the UK.

Mr Nolan believes Wi-Fi technologies, due to come on stream within years, offer a better bet.

While he may not be short of strategies to return the company to a growth path, the immediate challenge facing Mr Nolan is finding the money to develop them while maintaining the attractive dividend policy that underpinned the flotation.

This task is made all the harder by the massive €2.2 billion in debts loaded onto Eircom's balance sheet by its previous owners in the 2002 leveraged buyout of the company.

"In the short term, we are very comfortable," according to Mr Nolan.

Eircom should have dividend cover of around 2.5 times this year after capital spending of €200 million. The interest on its debts, though still hefty at around €120 million, will be less than last year due to a refinancing which cut the average interest rate to 5.6 per cent and fixed it across 79 per cent of borrowings.

"Not bad for company people describe as having a junk rating." says Mr Nolan.

Neither will the company have to find the €19 million in bonuses paid to Mr Nolan and other executives in connection with the re-financing or the €8 million cost of "in-the-money" share options issued to executives.

He is hopeful that Eircom's share price will improve once the market is convinced that the dividend policy is sustainable.

The current share price - around 15 cent below the €1.55 flotation price - reflects the market's view of the risk that Eircom will not maintain its dividend, he believes.

"We have to convince the City, by operating the company well, that the risk is less and we will pay the dividend and, when they are comfortable and see this coming through, then I think they will get less nervous," he says.

Mr Nolan has some more long days ahead of him.

© The Irish Times

viking

But the company has not been able to reach a commercial agreement with either of the big mobile networks.

Eircom are probably looking for a very good wholesale rate to use one of the mobile networks, whereas the mobile networks would argue that they need to get good ROI from their capex on infrastructure. Now why does that sound familiar...

The Government's plans to construct its own broadband network is not helpful either, according to Mr Nolan.

It says a hell of a lot when the Government of a country does not have any confidence in its incumbent telco and decides to build its own broadband network...

But it is not surprising, given the company's apparent reluctance to invest in this economically important area during the two years before the IPO...

And the other years before the IPO when investment was required and people were screaming for BB. Eircom need to realise that people do not forget very easily when something bad happens (or doesn't happen) to them, whereas the good things that happen are forgotten relatively easy (just look at some of the recent threads detailing people's unhappiness with UTV Internet).

We went to see Belgacom, which has the highest penetration in Europe - 27 per cent. They said you have got to get people to try it out. Their price point is the same as ours - €39.99.

Why did eircom need to go to Belgium to ask Belgacom how they managed to get the highest penetration in Europe when IOFFL, and common-sense, tells you that a price reduction was required before BB would take off. Lest us not forget that not too long ago DSL was €109 per month. But of course, Belgium is a very nice place and a little expenses paid trip over there would have been a very welcome break for some highly stressed execs. As you said yourself Philip, "People say we can't squeeze any more costs out? That's interesting, because the regulator \ keeps telling us we are inefficient and disallowing costs."

My how the tables have turned on eircom...

Ripwave

Originally posted by viking
"We went to see Belgacom, which has the highest penetration in Europe - 27 per cent. They said you have got to get people to try it out. Their price point is the same as ours - €39.99."

That's funny - Belgacom seems to think that their price point is the same as UTVs, not Eircoms - €29.95!

SkepticOne

Nolan: "We will get more and more down copper, but it has taken Government a long time to realise this."

LOL. This coming from the last incumbent telco in the Western world to deploy DSL.

Of course Eircom only rolled DSL out in a lot of towns to counter the threat posed by these fibre rings. It is surely not coincidental that the original fibre ring plan involved fibre rings in every town with a population above 1,500 and now Eircom have promised (but not yet delivered) DSL for every town above 1,500.

Nolan is clearly trying to deflect people away from the idea that Eircom only respond to threats by introducing the polar opposite idea into the media.

Eircom's PR department should really steer Nolan away from the media. This stuff is just too hillarious.

viking

Originally posted by Ripwave
That's funny - Belgacom seems to think that their price point is the same as UTVs, not Eircoms - €29.95!

In fairness to Phil, Belgacom launched their €29.95 service only 4 days ago. I would imagine when the eircom execs had their expenses-paid trip to Belgium that the price point was indeed €39.99.

viking

eircomtribunal

How things don't change!
P.

From this on December 2002: http://www.eircomtribunal.com/rat_poison/news_5.html

MadKevo

Originally posted by viking
In fairness to Phil, Belgacom launched their €29.95 service only 4 days ago. I would imagine when the eircom execs had their expenses-paid trip to Belgium that the price point was indeed €39.99.

viking

yep, plus there's a 400MB download limit, after which you're downgraded from 512 to 64 kbps forthe remainder of the blling month.

So deffo not comparing like with like, However their EUR40 service does look good: 10GB per month, with up to 3mbps or so depending on your line condition/length. Still drops you to 64kbps if you break your monthly limit, though.
/MK