Here we go again - part 5

mike65

No-one here should be surprised by this development, I'd laugh if the government said thanks but no thanks!

from IT

Eight years after its controversial flotation, Eircom is poised to offer the Government a stake in its telecoms network in return for control over public broadband systems owned by the State, writes Arthur Beesley , Senior Business Correspondent

Such a move would represent a fifth change in the ownership of the national phone network nearly a decade after many thousands of private investors lost their money in the privatisation of the company.

But after years of underinvestment in the Eircom network, it would also return the Government to a position in which it would have some say over the level of investment in the system.

Now controlled by Australian investors Babcock & Brown, Eircom wants to separate its telecoms network from the retail arm, which sells phone and other services to 1.6 million consumers and business users. Staff and former staff control 35 per cent of Eircom through an Employee Share Ownership Trust (Esot). While the shareholder agreement between Babcock & Brown and the Esot anticipates a separation of the business, it is not clear how the two parties would divide their interests in the business after a separation.

However, Babcock & Brown would keep ownership of the core network and run it as a wholesale infrastructure business and sell off the retail arm, which has been speculated to be worth as much as €1.8 billion.

The Eircom board has authorised its executive chairman Pierre Danon to enter discussions on such a separation with the Government and the telecoms regulator.

One proposal under discussion in Eircom is to integrate publicly-owned broadband systems - known as Metropolitan Area Networks (MANs) - with the Eircom network. While a financial payment to the Government could be made, Eircom is also examining the possibility of offering the Government an equity stake in the network business. The Government's attitude to such a proposal is not known, but it has long been unhappy with the level of investment in the network.

Babcock & Brown has increased capital investment in the system since it took control of the business a year ago. It is likely to argue that the integration of the MANs system with Eircom will avoid duplication of expenditure.

In anticipation of a move to separate Eircom's retail arm from its network business, the company has prepared to create separate accounting systems for each unit.

However, the company's board was unable to adopt a resolution on such a move when it met last week because the directors who represent the Esot were not present.

Former trade union head Con Scanlon was unwell and stockbroker John Conroy was travelling.

Sources close to Eircom and to the Esot said there was no division between the two parties on the plans to separate the business.

Joined up thinking anyone?

Mike.

Cabaal

Oh for god's sake,

Sponge Bob

LOL

eNet with their fibre is obviously having an 'impact ' on the high end business in the big cities. any mention of the ESB fibre one wonders ???...not that esb fibre will do much without a MAN at the end of it

add in a new minister and a dysfunctional department behind him who had grave difficulties with the 'accounting separation 'of their arse and their elbow .

okmqaz42

I think the offer went somthing like this.
"you are a bunch of idiots, how would you like to buy some old technology that will soon be entirely replaced by the mobile phone system, and we will take the shinny new broadband that everbody wants and make out like bandits"

If they go for this I think we will need a coup

SeaSide

Sponge Bob wrote:

LOL

eNet with their fibre is obviously having an 'impact ' on the high end business in the big cities. any mention of the ESB fibre one wonders ???...not that esb fibre will do much without a MAN at the end of it

add in a new minister and a dysfunctional department behind him who had grave difficulties with the 'accounting separation 'of their arse and their elbow .

The first time that I've seen that the MANs must actually be working.

SkepticOne

The current government might just be dumb enough to take them up on their offer.

madboggar

When i read the above story on rte.ie, i was totally amazed. That is giving eircom a top of the range aston martin and they are going to give us a 1990 fiat punto that has been crashed twice.

I am pleading with the government do not go down this road. It is up to the regulator to force eircom to comply. Do not hand over an expensive fibre network around ireland for a shaby copper network.

Raskolnikov

How much did the fiber optic network cost to build?

BendiBus

I don't think Government deliberations would be about the value of the existing Eircom infrastructure vs fancy new fibre MANs. It would be about Government ability to influence the FUTURE Eircom infrastructure.

Negotiations however, would indeed be comparing the value of the Governments MAN's vs crappy Eircom copper.

iwb

I can't see how this automatically means that the MAN's are so successful that they are a threat. Maybe they are seen as a potential threat in the future. More likely eircom are going to offer the government greater uptake on the MAN fibre when under their control. Otherwise, it is a totally dumb proposal and not even our current government will see it any other way.
Just this week there have been complaints in Wexford about the under performance of the MAN there. I get the feeling generally that there is dissatisfaction over uptake at present, although it seems there is a lot more talk about MAN connections over the past year.
Although the copper is in bad nick generally, it does pass a very large percentage of the homes and businesses in Ireland whereas the current 27 MAN's pass very little directly without some expensive digging. Again, this might appear attractive to the powers that be as a short term solution.
There has been some mumblings about NGN's for a while now but it is hard to embrace it when there are still lots of people in Ireland with no broadband options.
Of course, the way forward is to keep building fibre infrastructure but also to link stranded MAN assets with decent, inexpensive backhaul. If we do end up with this infrastructure in all larger towns in the country in a few years and we also have more wireless/mobile options by then, we are looking after now and the future.
Maybe one day, we will even be able to buy Magnet type fibre services in a large percentage of homes and businesses in five years. Gigabit or bust!
Disclaimer
While it may seem that I am an eircom fan, nothing could be further from the truth. Hopefully they never get another penny of tax payers money!

bealtine

mike65 wrote:

No-one here should be surprised by this development, I'd laugh if the government said thanks but no thanks!


Mike.

It's a time for new thinking, if B&B think the eircom core network is so bad that they need to make a clumsy play for the MANs, then it's time to put a rocket up Comregs arse.
What exactly have they been doing since their inception?
Weren't they supposed to be the consumers champion?
So now we have an admission of how bad the copper is and Comreg dancing about the flames (like Nero) telling us everything is fine...

Abolish them!

SkepticOne

What I think this is is Eircom testing the waters seeing if they can get their PR out without criticism or analysis by the news media.

The stuff about separation of accounts is rubbish. Eircom have been required to produce separate accounts for their wholesale and retail arms for many years now.

Eircom are trying, imo, to exploit people's lack of understanding about the MANs, public ownership, and the splitting of Eircom to get concessions out of the State in return for Eircom persuing their own business interests.

Eircom have been presenting the splitting of their wholesale and retail arms as something that will benefit the country. In fact it is in Eircom's interest to do so. As a vertically integrated company Eircom have been required to maintain a large margin between wholesale and retail prices in order to allow resellers like BT Ireland to exist. Splitting the company eliminates this. The separated retail arm would be more valuable as it would not be regulated.

Public ownership is also a red herring. Like the previous owners of Eircom, at some point Babcock & Brown will be looking to exist the market. With an increase in competition from wireless and mobile companies, Eircom is no longer quite the wholesale monopoly it once was and is therefore less attractive on the open market. It makes sense to try and flog it to the State at an inflated price again presenting it as a benefit to the country.

The MANs have always been vehemently opposed by Eircom because they represent a potential and actual threat since the allow competing companies to completely bypass Eircom. Eircom exploit the fact the people still think in terms of one company supplying everything. This is how they get away with calling the MANs "duplication".

It is interesting to note that all the things that Eircom are coming out with as part of their business strategy have at one point or another been suggested here on this forum as being good for the country. Such is the power of Eircom's PR machine.

thebman

The one good thing from this is that at least we know eircom knows the monopoly is over and that they have to react. Be that getting out of the market or trying to broker deals with the government, this means they know the game is up.

Its only a matter of time before the mobile operators force them to compete and line rental will have to come down if eircom hope to keep any customers at all.

mike65

Maybe eircom should keep Meteor and give the rest back to the government.

Listen to the The Right Hook, with Damien Kiberd sitting in atm. I expect he'll give this some time as will Matt Cooper on the Last Word. Don't expect to hear comreg on either.

Mike.

Marlow

Eircom getting their hands on the MAN infrastructure would definatly be a huge set-back. Currently the MANs + ESB fiber is the only viable fiber backhaul throughout the country, where neither Eircom or BT are involved.

Both Magnet and Smart are relying on this infrastructure heavily to be competitive and independant and so are a lot of other ISPs.

Eircom getting their hands on the MANs would mean, that they can pull the plug on the competition again.

Sponge Bob wrote:

eNet with their fibre is obviously having an 'impact ' on the high end business in the big cities. any mention of the ESB fibre one wonders ???...not that esb fibre will do much without a MAN at the end of it

Not entirely true. Take Galway for example, the Ballybaan mast site is directly on the ESB fiber, as the masts are owned by the ESB. That means, that the likes as IBB don't buy fiber of e-Net, but of ESB directly and all backhaul between their sites in Galway is wireless.

/Marlow

Solair

It would be as counterproductive as allowing Ryanair to purchase Aer Lingus.

How could a single infrastructural monopoly that was mostly commercially controlled be in the interest of the public?

I hope our shiney new minster isn't as gullible as his FF predecessors were.

BluesWeeper

outside of eircom , Bt and Esb no other company has the financial or technical ability and position to promote the Mans to a lit level of at least 50 percent, at present more than 80 pecent is dark.


so..right now tax payers money is being wasted. anything would be better.

smellslikeshoes

BluesWeeper wrote:

outside of eircom , Bt and Esb no other company has the financial or technical ability and position to promote the Mans to a lit level of at least 50 percent, at present more than 80 pecent is dark.


so..right now tax payers money is being wasted. anything would be better.

Although your right that the mans aren't being fully utilized at the moment, The growing demand in the future will change this eventually. Giving eircom the mans would be terrible for competition which in turn would be terrible for the consumer.

oscarBravo

BluesWeeper wrote:

anything would be better.

...unless, of course, it was worse. Then it wouldn't be better, would it?

BluesWeeper

..Maybe it is worse than worse as we know it at the moment, its dead therefore anythings' better

meanwhile the politicians talk and ...hmmmm...

http://www.ireland.com/newspaper/breaking/2007/0803/breaking51.htm

oscarBravo

"Not fully utilized" isn't the same as "dead". I'm wary of the standard "it's so bad that anything would be better" hyperbole - would you advocate shutting down the health service, because anything's better than the shambles it's in now?

bk

BluesWeeper wrote:

outside of eircom , Bt and Esb no other company has the financial or technical ability and position to promote the Mans to a lit level of at least 50 percent, at present more than 80 pecent is dark.


so..right now tax payers money is being wasted. anything would be better.

Actually a lot of unused fibre isn't necessarily a bad thing, it can show could forward planning.

You see when laying fibre about 80% of the cost is the manual labour involved in actually laying the cable. The actual cost of the fibre is trivial compared to the labour costs. Therefore it is normal practice in the industry to lay extra fibre then they actually need and just leave it dark.

So you see this is just more spin by Eircom.

Sponge Bob

...and lighting a section of fibre is pretty trivial. eircom are best known where I live for not even supplying a pole and copper for over one year.

Their inhouse fibre installation and connection expertise is worse than their copper installation expertise.

Meanwhile enet can connect a premises ( including the dig) in less than 6 weeks.

Marlow

Sponge Bob wrote:

Meanwhile enet can connect a premises ( including the dig) in less than 6 weeks.

Sorry. Make that less than 3 weeks, in my real life experience.

/Marlow

BarryM

http://www.ireland.com/newspaper/finance/2007/0813/1186781453260.html

Is a feature peice on the topic.

Extracts:-
"It sounds too good to be true [Danon's propsal] and of course it is. That said, the Minister would do well to give Danon a hearing. The current situation, whereby Eircom and the Government in effect compete to provide wholesale broadband in urban areas, has a questionable logic to it. Whilst competition is generally a good thing, there is a strong argument that a country of Ireland's size cannot support two competing fixed networks as well as the various mobile networks. No one, for example, would make a case for constructing a second electricity distribution system."

"The nightmare scenario for the Government would be to enter into some sort of deal with Babcock & Brown involving the merger of the two networks only to see the Government-funded network sold on, refinanced or subjected to some other form of financial engineering to turn a few dollars for Babcock & Brown.... And it would be foolish to underestimate the Australian firm's appetite for such deals. Only last week it emerged that they have come up with some fiendish plan to sell off and lease back Eircom's mobile phone mast network."

"Babcock & Brown may be making some comforting noises about infrastructural funds and long-term investment, but fundamentally they did not come half way round the world to buy Eircom to give Ireland a world-class telecommunications system...... They came to make as much money as they can as easily as they can. If that involves investing in the network that's fine, but if it doesn't then, so much the better."

IMO, the real kicker in the story is the following -

"Without a doubt, some sort of deal can be struck [between Danon & Ryan]. The measures put in place to facilitate the sale of Aer Lingus are a recent example and they seem to have withstood their first real test: the hostile approach from Ryanair.

The inhabitants of the West may take a different view of how well the measures are working given the Government's decision so far to to wash its hands of Aer Lingus's decision to abandon the Shannon to Heathrow route rather than use its shareholding to try and influence the company.

But the Shannon issue is really one of whether or not the Government chooses to exercise its power, rather than one of impotence. And that is the position that they must be in if they are going to get into bed with Babcock & Brown."

Am I alone is failing to see the connection between what Danon is proposing a the Aer Lingus / Shannon fiasco??

Bye, Barry