[SBP]Eircom plans major shake-up regardless of Meteor outcome

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10 July 2005 By Eamon Quinn

Eircom will decide if it will carry out a major reorganisation of the group in the next few weeks.

A senior source at the company told The Sunday Business Post that the reorganisation would affect all divisions and would go ahead regardless of the result of Eircom's bid for mobile phone firm Meteor in this month's auction.

A reorganisation of Eircom would be triggered if its bid for Meteor was successful because the company's business would be transformed by owning the company. Eircom would need to set up a special investment vehicle if it decided to finance the purchase of Meteor by using private equity money.

The plans for the corporate reorganisation have been discussed at senior levels of the company.

The telecoms giant has already undergone considerable change in senior personnel since returning to the stock market last year.

American Herb Hribar, who worked as managing director of Eircom's wholesale and network division in the run up the re-sale of the company, left Eircom last year.

Fiona Tierney, director of the company's wholesale division, departed in March.

It recruited Geoff Shakespeare as chief technology officer last month and appointed Paul Reid as its operations director.

A spokesman for Eircom would not comment on any plans for a reorganisation.

Shares in Eircom have dropped in recent weeks amid concerns that it will pay too much for Meteor. The spotlight has fallen on how Eircom will finance the acquisition if it were to outbid Smart Telecom and Denis O'Brien in the auction.

Eircom shares traded last week at €1.77, almost 20 per cent down from the all-time high of €2.20,which the shares hit last February.

Brid White, an analyst at Merrion Stockbrokers, said Eircom had only €342 million in wriggle room for it not to breach the most restrictive debt covenants with its bond holders.

Consequently, if it were to pay as much as €400 million to €450 million for Meteor, Eircom would need to raise money from other sources to finance the acquisition.

Eircom would also need to spend €47million in spectrum and administrative costs in the first year to regulator ComReg if it were to bid for a 3G phone licence in the coming weeks.

Analysts believe that the race for Meteor will be between Eircom, Smart Telecom and businessman Denis O'Brien, who set up Esat which was eventually sold to British Telecom.