Nuggets from Sir Tony's Eircom AGM Speech

damien

I'm sure some here will want to comment.

Although it is only five years since the Government sold eircom, an historical perspective will, I believe, show eircom as a pioneer in the context of Ireland’s new economy. The first major state privatisation; one of the first Irish utilities to access international equity markets; and one of the most vigorously re-structured and re-shaped Irish enterprises at the start of the 21st century

The Irish telecoms market is arguably, after Denmark, the most liberalised in Europe. There are over 40 authorised operators (many re-selling eircom’s network); eircom has only 44% in value terms of the total telecoms market including mobile, the lowest market share of any European incumbent other than BT (which must be a slight cause of alarm to you as shareholders or workers); and it continues to invest at above the European average in its network. The notion that eircom has dragged its heels and fought against liberalisation is belied by the fact that eircom has only once in the past three years launched a legal challenge against the regulator. Eircom has done a remarkable job to survive through de-regulation, and now it will vigorously resist over-regulation to ensure for you as stakeholders that the market really is free and liberal and competitive .

I believe it is a company that on sober analysis has done extremely well for all its stakeholders within the parameters of pricing control and investment obligation, but it remains a company that, in my view, is at times quite unfairly and deliberately over criticized.
Our critics cannot have it both ways.
They cannot criticize Eircom for being a monopoly, which it is not, in that it has now got less than 44 percent of the total telecoms market in the country and then lumber it with special universal service obligations which are not borne by our competitors, Vodafone and O2.
They cannot call for a cost-driven price structure for connection to eircom’s network while Vodafone and O2’s networks remain tightly closed to other operators (and importantly are fifteen times more expensive for operators to connect to than eircom’s network).
They cannot criticize eircom for refusing to sell its network at below cost to re-seller operators, some of whom employ virtually nobody in Ireland and make no investment in the State’s telecoms infrastructure, particularly when eircom has achieved a 48% reduction in real terms in the average telephone bill since 1997.

They cannot criticize eircom for being inefficient while it has made extraordinary efficiency gains through relentless headcount reduction (since privatization over three thousand jobs have been eliminated in the Fixed line business without a single day lost to industrial action).

They cannot criticize Eircom for under-investment, when eircom has, every year since privatisation, invested at above the EU average; or for the delayed start in the rollout of broadband and not recognize the role of the regulator; nor realize (as many of them do but will not talk about) the overall inadequate return on capital allowed by the Regulator in regard to network prices charged to other operators.

The price of broadband in Ireland today is at mid-point in European levels which, considering the dispersed nature of much of our population, is entirely appropriate. And I might add that broadband gets daily more competitive -- which we welcome provided it is fair and not -- I repeat, not -- subsidized by our shareholders.

Might I also nail a particular lie used by some journalists that the slow investment in broadband inhibited foreign investment in Ireland. In the last ten years foreign direct investment into Ireland as a % of GNP has exceeded every major country in Europe. The trend on inward investment continues to be strong. The latest World Investment Report from the United Nations Conference on Trade and Development showing that the state was the seventh most significant recipient of foreign direct investment in 2003. In a year when investment in EU member states fell by 11%, foreign direct investment to Ireland rose by 4%.

So, clearly, either broadband was not a condition precedent to investment or supply was adequate.

And finally, they cannot clamour for a competitive market (by which they mean the open access to eircom’s network) while ignoring the restrictions on eircom that prevent it from competing. It is time for the over-regulation of eircom’s retailing activities to be lifted.

As shareholders, you all have a tremendous interest and personal investment in ensuring that Eircom is not put at a disadvantage by the Regulator in regard to other forms of competition.

There appears to be a different climate of criticism in the media applied to matters that relate to Eircom than those that relate to Eircom’s competition. Every shareholder in this room and in the company has a direct interest in ensuring that fairness and equity obtain in all of these matters. If an unfair representation is made of the activities of Eircom, as has been the case by many of our critics, then the only sufferer in the long term will be you, as workers and shareholders in this very enterprise.

A recent example was the National Competitiveness Council report which said that Fixed Line Telecoms was competitive (indeed the only major utility sector noted as such) but in the summary continued to call for more regulation on the sector.

But I would also say that eircom is its own harshest critic. Yes, the broadband take-up rate is among the fastest in Europe, but we need to grow even faster to climb the European league table. Currently the rate is nearly the highest in the EU, is accelerating and soon will see Ireland catch up on our European neighbours. When the 100,000 target is achieved, ahead of schedule, management will announce a new ambitious target.

Yes the cost of telecoms has fallen dramatically due to eircom’s price reductions, but eircom can continue to add value and is hugely frustrated that it continues to be prevented from applying eircom’s lower prices in mobile telephony. Eircom must get back into mobile and we are building the commercial case for re-entry.

And yes eircom can boast of a strong record in driving efficiency reducing headcount from 10,800 (excluding Eircell) at the time of its privatisation to 7,500 today. But as the network becomes more efficient the company must and will reduce headcount further.

Eircom endures endless criticism and analysis but when it is objective, the company wouldn’t have it any other way. Change is never easy and rarely perfectly executed but a changing eircom, one whose focus is customers and shareholders, competing in a liberalised telecoms market is what you see today.

So, in summary, I say, "Here is a company superbly lead by Phil Nolan and the senior management, structured through the participation of the ESOT and its other major shareholders in a sensible way, investing capital at a rate which is at or above the European average serving the consumer well with fixed line and broadband, and that hopes to get back into mobile, requiring the assistance of the consumer, the Regulator and the Government in achieving this end if we are going to get a real reduction in the cost of mobile calls.


"Its fixed-line calls are one-fifth the cost of mobile calls. Its broadband is at a median price for all Europe. It will achieve its target of 100,000 broadband customers early. Internet usage in Ireland is at an average level for all countries in Europe. It aims increasingly to provide service with efficiency and with a smile. Its tariffs are, today, 48 percent in real terms below those of 1997, something which almost no other company in Ireland can claim, and it stands ready to go forward with its shareholders, its management and its workers in providing an essential and exciting service, or series of services in Europe’s most rapidly expanding economy.

spongebob

damien.m wrote:

"service with efficiency and with a smile"

Enough

M

Ripwave

TonyOR wrote:

eircom has only 44% in value terms of the total telecoms market including mobile, the lowest market share of any European incumbent other than BT

Given that mobile pentration is the highest in Europe, it hardly takes a PhD in Nuclear physics to recognize that the landline share of the "total telecoms market including mobile" is going to be lower than in other countries.

You've sometimes got to wonder whether these people believe their own lies.

This is a Republic, Damien - unless he hands in his Irish passport, he's not "Sir" on this side of the water.

SkepticOne

Ripwave wrote:

Given that mobile pentration is the highest in Europe, it hardly takes a PhD in Nuclear physics to recognize that the landline share of the "total telecoms market including mobile" is going to be lower than in other countries.

You've sometimes got to wonder whether these people believe their own lies.[/SIZE]

Of course, Eircom themselves voluntarily sold their own mobile division bringing about this situation that they now use in their spin.

They still totally dominate the market for broadband which is why we see crippled versions of DSL and poor availability and little incentive for Eircom to do anything about it.

eircomtribunal

It is difficult to find one true sentence in all of this, but here it is

They cannot criticize Eircom...for the delayed start in the rollout of broadband and not recognize the role of the regulator;

Doherty and Goggin need to be sent for treatment of chronic Stockholm syndrome.

P.

Capt'n Midnight

It would be funny if it wasn't true.

jmcc

eircomtribunal wrote:

Doherty and Goggin need to be sent for treatment of chronic Stockholm syndrome.

It would be better if they were part of an unsuccessful rescue attempt.

Regards...jmcc