Eircom's earnings may fall by a third next year

bealtine

http://www.independent.ie/business/irish/eircoms-earnings-may-fall-by-a-third-next-year-3032885.html

EARNINGS at Eircom are expected to fall as much as one- third by 2013, the Irish Independent has learned.

That is according to the latest confidential forecasts shown by Eircom managers to some creditors.

Eircom is currently in talks with lenders in an effort to restructure its €3.7bn of borrowings.

The latest forecasts reveal that annual earnings before interest, taxes, depreciation, and amortisation (EBITDA) are expected to drop to just €465m in 2013.

It is down from €699m in the 12 months to the end of June 2010, the most recent figure available from the company.

A spokesman for Eircom declined to comment.

Earnings are reckoned to have dropped to €640m last year.

Latest forecast

If the latest forecast proves correct it means a staggering drop of more than a third in just three years.

The EBITDA figure is a crucial element in plans to "restructure" the company by writing off more than €1bn of its €3.7bn in debts.

Lenders and potentially a High Court judge will determine how much debt the company can support based on the earnings outlook.

A debt restructuring plan put forward by "first lien" lenders holding €2.4bn of well-secured loans is now being revised to take account of the latest forecast. The top lenders previously offered to write off 7pc of what they are owed for ownership of Eircom. That may now rise.

The revised forecast was revealed at a meeting last week attended by Eircom management and the company's top lenders.

Trade publication 'Capital Structure' says lenders have been told to expect a pick-up in EBITDA after 2014.

The company is now forecasting EBITDA of €532m this year, down from €553m previously budgeted for, according to Capital Structure.

Even with a pick-up from 2014 there is no prospect of a recovery to even last year's level by 2017.

Capital Structure says management put the cost of rolling out new fibre optic cable at €900m.

The spend is seen as crucial to winning back market share, even as the company will leave some lenders empty-handed.

Eircom is targeting to hit one million homes with the roll-out in three years.

Revenues have also been revised down, and are now expected to fall to €1.5bn this year not the previously budgeted €1.633bn.

It could drop to €1.47bn next year, the company is understood to have warned.

It is the second time Eircom's most crucial financial numbers have had to be revised in a year.

- Donal O'Donovan

funnyname

So when they harp on about 60,000 customers coming back to them in the last year they are failing to tell us about the 120,000 who have left!

bealtine

funnyname wrote: »

So when they harp on about 60,000 customers coming back to them in the last year they are failing to tell us about the 120,000 who have left!

I think it's the law of diminishing returns, their prices are simply way too high and people are furiously looking for alternatives. They will even use mobile midband as an alternative as it simply is cheaper. The idea that €60 is a fair price for 1Mb/s or 3Mb/s broadband is laughable, isn't it better to have some income from broadband than none at all?
Of course the main culprit in this scenario is Comreg who have set such a high line rental price for eircom which is an impediment to the takeup of broadband throughout Ireland

watty

Eircom set the price and Comreg allowed it.

Eircom themselves admit that €19.95 is what Line Rental + Broadband should be. But they are servicing all that Debt. Which wasn't money spent by them. A serial victim of the "owners".

EBITDA ought to be €250M and then they would see growth. Growth in 2014 is impossible at current pricing.