Buyer has no immediate plans to split business

Babcock & Brown has no immediate plans to split Eircom into separate wholesale and retail divisions, but aims to expand the business by focusing on areas such as broadband and mobile telephony.

"Our strategy is a growth strategy. We want to develop services like broadband, mobile, 3G and corporate services," Eircom's chairman designate, Pierre Danon, said.

Eircom's new owners are also interested in the provision of value-added broadband services such as delivery of telephone and television services over the internet.

For the time being, the new owners were happy to run Eircom as a "vertically integrated company," Mr Danon said.

But he noted that there is growing pressure on telecoms firms from governments and regulators across Europe to separate their wholesale arms, which run the phone networks, from their retail divisions, which sell phone services to homes and businesses.

Mr Danon also said the company would continue to reduce costs to offer good value to its customers and to invest for growth. However, the company hopes that redeployment into growth areas will reduce the need for job cuts.

Mr Danon noted that Babcock & Brown was not going to run Eircom with a view to exiting the business, but saw it as a long-term investment.

The Australian firm is confident that it can continue to invest in capital expenditure at Eircom despite the increased debt burden the company will be carrying. Babcock & Brown executive director Robert Topfer noted that the cost of servicing Eircom's debt would be broadly the same after the takeover as the current cost of debt servicing and dividend payments to shareholders.

"We will be swapping dividend payments for interest payments," he said.

Meanwhile, the preference share alternative to the cash offer will allow the Esot to redeem the shares at a rate that will allow it to continue making tax-efficient distributions to its members at much the same pace as in the past.

In the event that the Esot wants to realise the value of part of its investment, it has rights to convert its stake into shares in Babcock & Brown Capital, which is listed and traded on the Australian Stock Exchange.