Eircom's revenue falls 6pc as fixed-line woes persist

bealtine

http://www.independent.ie/business/irish/eircoms-revenue-falls-6pc-as-fixedline-woes-persist-1871882.html



By John Mulligan

Friday August 28 2009

Consumers are continuing to eschew Eircom's fixed-line services, with overall revenue at the group sliding 6pc in the quarter to the end of June to €479m and earnings dropping 2pc to €173m.

The decline comes as the company is on the verge of being sold by its Australian parent, Eircom Holdings, to Singapore's STT for over €130m, in a deal that is expected to be signed off next week. The agreement will require the approval of the telco's employee share option trust and may not be sealed until the end of the year.

Eircom chief executive Paul Donovan remained upbeat yesterday, describing the company's full-year performance as "robust" given the current economic environment.

Eircom's revenue for the 12 months to the end of June was just under €2bn -- a 3pc decrease on the previous full-year period -- while group adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were 1pc lower at €692m.

But the group figure was somewhat flattered by a solid performance from its mobile arm, Meteor, which recorded an 11pc year-on-year increase in full-year EBITDA to €124m, as its subscriber base topped 1 million. Meteor's revenue was up 3pc in the 12 months to the end of June, at €496m.

But a €720m non-cash goodwill impairment at the end of the first half of the last financial year propelled Eircom to a full-year operating loss of €486m compared with an operating profit of €464m a year earlier.

Eircom's revenue will also come under significant pressure if a planned cut in the price Eircom can charge competitors for accessing its lines to provide alternative broadband services to consumers goes ahead.

Appeal

Telecoms watchdog ComReg instructed Eircom earlier this month to slash the monthly fee it charges competitors from €8.41 to just 77 cent.

Mr Donovan told the Irish Independent the company has not yet decided whether it will appeal the decision by ComReg, and declined to say how the watchdog's move would impact Eircom's revenues and earnings. Eircom has just under three weeks left in which to appeal the decision.

One source close to the company yesterday described the move by ComReg as being akin to "industrial sabotage".

Eircom's own broadband subscriber base grew by 12pc during the year to 665,000, but the pace of new customer sign-ups has slowed, the company said.

With a massive net debt pile of more than €3.3bn at the end of June, Eircom has been cutting jobs and freezing pay in a bid to contain costs. Over 900 jobs have been eliminated since 2007. Group operating costs were down 4pc year-on-year to the end of June, at €1.305bn.

Mr Donovan said Eircom was on track to remove €130m from its annual operating costs by June 2011.

- John Mulligan

bealtine

http://www.irishtimes.com/newspaper/finance/2009/0828/1224253408485.html
ARTHUR BEESLEY, Senior Business Correspondent

EIRCOM INCURRED an operating loss of €486 million in the year to June as the Australian investment fund that controls the company prepared to sell off its controlling stake, a deal that would represent a fifth change of ownership in little more than a decade.

While the final aspects of a likely transaction with Singapore Technologies Telemedia (STT) are still being hammered out by Eircom Holdings (ERC) in Sydney, new annual accounts from Eircom reflect the strain on the heavily-indebted business due to recession in its main market.

Revenue dropped 3 per cent to €1.99 billion, and adjusted earnings before interest tax depreciation and amortisation (Ebitda) was 1 per cent lower at €692 million.

Eircom lost 67,000 fixed-line contracts during the year, but its mobile unit, Meteor, delivered increased revenues and profit.

Eircom’s operating loss, which reversed an operating profit of €464 million the previous year, followed a €720 million goodwill writedown in February.

The writedown was taken in light of Eircom’s rising pension deficit and a deteriorating profit outlook. It was seen as an acknowledgement by ERC, then Babcock Brown Capital, that it overpaid for the company in a €2.36 billion takeover deal in 2006.

Newly-installed Eircom chief Paul O’Donovan said the economic climate was challenging, adding that the slowdown was having an impact on volumes and revenues.

“In the light of what’s gone on overall in the Irish economy, I’d describe the performance as robust in challenging times.

“Customer growth and retention will remain key objectives for the business, which we expect to achieve through increased value and service.”

A total of 270 staff have so far opted for a voluntary severance package in which the company wants to eliminate as many as 1,200 jobs by June 2011.

Mr Donovan said rising unemployment meant the achievement of that number of voluntary job cuts was “more challenging”, but said “compulsory redundancies are not on our agenda at the moment”.

Fixed-line revenue dropped 6 per cent to €1.56 billion due to lower volume and voice traffic and higher price discounting. Fixed-lined adjusted Ebitda dropped 3 per cent to €568 million.

Mr Donovan attributed the loss of fixed-line contracts to cancellations from business customers as they laid off staff, and said there was a very low level of new contacts due to the collapse of the property market.

Meteor’s revenues rose 3 per cent to €496 million. In part that reflected a 38,000 increase in the number of subscribers, which brought the total base to 1.03 million. It was offset, however, by a 6 per cent decline in monthly average revenue per user, which dropped to €37.30. Eircom said this was mainly due to promotions during the year.

While Mr Donovan said customers were spending less money on phone units, he also said Meteor had lost revenues from international calls from immigrant subscribers who had left Ireland.

Sponge Bob

Some interesting snippets

http://investorrelations.eircom.net/pdf/eircom_Jun_09_results_presentation.pdf

Less than 40% of their ADSL customers are now on 1mbit . Just over 60% now 3mbits or higher .

Lines rented down from 1.6m to 1.54m . The number of lines will likely fall by 6% from 1.6m at the beginning of 2009 to 1.5m at the end of 2009 . In 1999 the number of lines rose by 6% to 1.6m by way of contrast .

Calendar quarters

PSTN lines fell by 12k in Q4 2008
PSTN lines fell by 20k in Q1 2009
PSTN lines fell by 24k in Q2 2009

They are probably going to lose at least 100k in the next year , going below 1.5m for the first time since the 1990s

ADSL Growth . I predicted long ago it would go q on q negative in q2 2009 but it didn't , by a whisker .


ADSL Growth 21k Q3 2008
ADSL Growth 25k Q4 2008
ADSL Growth 19k Q1 2009
ADSL Growth _7k_ Q2 2009

Eircom estimates are that Fixed Wireless has stagnated since Q4 2007 /

watty

I thought it would be negative by now too. I suspect without any major shakeup it will be soon.

The Fixed Wireless guys can't get investment money to rollout more bases. DSL and Fixed Wireless is losing to UPC in Cities.

Everything is losing to 3G Mobile and will continue to till the public is educated that it isn't Broadband and the Mobile operators stop subsidising Data bay voice to make it 1/2th the price of alternatives when in reality is 2x to 4x more expensiveat the same Cap of 20G to 40G as real Broadband.

bealtine

Sponge Bob wrote: »

Some interesting snippets

http://investorrelations.eircom.net/pdf/eircom_Jun_09_results_presentation.pdf

Less than 40% of their ADSL customers are now on 1mbit . Just over 60% now 3mbits or higher .

Lines rented down from 1.6m to 1.54m . The number of lines will likely fall by 6% from 1.6m at the beginning of 2009 to 1.5m at the end of 2009 . In 1999 the number of lines rose by 6% to 1.6m by way of contrast .

Calendar quarters

PSTN lines fell by 12k in Q4 2008
PSTN lines fell by 20k in Q1 2009
PSTN lines fell by 24k in Q2 2009

They are probably going to lose at least 100k in the next year , going below 1.5m for the first time since the 1990s

ADSL Growth . I predicted long ago it would go q on q negative in q2 2009 but it didn't , by a whisker .


ADSL Growth 21k Q3 2008
ADSL Growth 25k Q4 2008
ADSL Growth 19k Q1 2009
ADSL Growth _7k_ Q2 2009

Eircom estimates are that Fixed Wireless has stagnated since Q4 2007 /

The total line loss over the period in the report is 82000 lines .

In June 07 there were 1,624,000 and in June 09 there were 1,542,000 lines.
It seems the loss of lines is accelerating fairly rapidly.

It seems to me that if there weren't 665,000 DSL lines the fall would have been more severe. DSL is the only thing holding up revenues in the fixed line arena. Roughly 40% of lines are DSL and without this revenue stream eircom would be dead in the water.

bk

Eircom's problems is that it is losing customers at two different ends to Mobile and UPC.

Eircom are losing the low end customers, who just want a basic service to do some light web browsing and email for as cheap as possible to the mobile 3G services.

And they are losing the customers who want a high end service with fast speeds and large cap to UPC.

The funny thing is that I predicted this years ago, I've always said that Eircoms policies might help them in the short term, but would hurt them badly in the long term.

BT in the UK, while being far from perfect, has maintained it's monopoly much more effectively, by investing in it's network, keeping line rental low and even allowing competition and LLU.

BTW I'm not as critical of mobile BB as others here, it isn't for me (have it through tethering on my iPhone), but it can suit many cost conscious light users. As long as it isn't mis-sold as something it isn't and as long as the government/comreg don't try to make out it is more then it is in their reports.

bealtine

bk wrote: »

Eircom's problems is that it is losing customers at two different ends to Mobile and UPC.

Eircom are losing the low end customers, who just want a basic service to do some light web browsing and email for as cheap as possible to the mobile 3G services.

And they are losing the customers who want a high end service with fast speeds and large cap to UPC.

I believe that they are losing customers to UPC at both ends of the spectrum.
At the cheaper end a basic service from UPC can cost about E25 or so and people are going to UPC as it's simply better value. Consider a customer looking for basic bb (3-5Mbps) and given a choice of 3Mbps for E25 or for E50 from eircom which do you think they will choose?

As eircom have lost 82,000 lines in two years the consumers have obviously chosen, I am certain a large percentage of those lost lines has been to "substitution".

Then,indeed, the light users can get a package for about E20 from a mobile midband provider...

The choices are stark for the overpriced (line rental) lines from eircom, adapt or die slowly. A basic bb connection from eircom (I include all the resellers here) has to compete with both mobile and UPC otherwise at the sweet spot of around E30...This point seems to be lost on the powers that be.

Of course UPC are a more urban phenomena but it's the urban areas that were handy and relatively easy cash for eircom. So eircom are left to service the "harder" rural areas while UPC gobble up most of the urban areas.

BTW I'm not as critical of mobile BB as others here, it isn't for me (have it through tethering on my iPhone), but it can suit many cost conscious light users. As long as it isn't mis-sold as something it isn't and as long as the government/comreg don't try to make out it is more then it is in their reports.

Nothing wrong with mobile midband for what it is, I use midband on my laptop for a few quick emails and a little bit of (slow) VPNing. It works, but I really wouldn't want to use it full-time or depend on it in a professional way. It's simply too unreliable...

As for .gov and Comreg pretending mobile midband is our saviour, really that's just plain silly.

watty

I agree, there is great value to Mobile Data. But not reasonable to claim it's Broadband and have it under cut data only providers by cross subsidy from voice customers. That's dishonest marketing and unfair regulation. Shows a lack in Consumer Protection and regulation rather than anything wrong with Mobile Operators.

Sponge Bob

Mobile is so completely unreliable that it is not worth calling broadband, it is flat rate dialup reborn , that is all. A proper regulator would host a speed test site itself and if you get 3 tests with the slow speeds you may formally exit the contract at any time ...for non performance .

Then you are left with the genuine dial up substitute and no graphics merchants or the impoverished ...but who are happy with it .

di2772

I pay for 3Mb from Eircom but i only get less than 1 Mb because of distance. Mobile is useless in my area. The minute i can get better BB anywhere bye bye Eircom. Im ripping that line out of my house and canceling phone and BB.