Cantillon

INSIDE THE WORLD OF BUSINESS

Sky is reaching for the stars

Sky’s the limit for BSkyB’s growth plans for Ireland, according to its chief executive Jeremy Darroch yesterday.

The satellite broadcaster set up by Rupert Murdoch in the late 1980s has opened an impressive corporate headquarters in Dublin 4 and it is recruiting feverishly as it gears up to launch residential broadband and telephone services in February.

Sky doesn’t release any meaningful data for its Irish operation – either subscribers, turnover or profits – but there are more than 700,000 of its set-top boxes in the market.

It’s a position of strength for Sky as it prepares to launch into broadband and telephone here. Even so, muscling in on these markets won’t be easy.

Cable TV rival UPC has made impressive progress with its triple play – TV, broadband and telephone – over the past couple of years.

At the end of last September, UPC had 294,300 broadband customers. This figure increased by 22 per cent year-on-year. It also had 223,400 telephone customers, which was up 55 per cent year-on-year.

UPC also has by far the fastest broadband speeds with its basic offering now 50Mb.

Market leader Eircom has 979,000 fixed-line phone customers and 459,000 broadband, although these are declining as competitors eat into their market share with cheaper and faster products.

However, Eircom has a new chief executive, American Herb Hribar, and an ambitious network investment programme aimed at keeping it in the game.

British mobile phone giant Vodafone is also an active competitor in these markets.

An interesting battle lies ahead. The winners – in the near term at least – should be consumers, with prices likely to fall as the companies fight for market share.

Pay day delayed but on course for Coulson

Paul Coulson’s big pay day at Ardagh will be delayed until the end of the year as the company digests its latest acquisition, Bloomberg reported yesterday.

The company filed registration documents to kick off its planned US initial public offering as far back as last May.

But Couslon (right), the biggest shareholder in the firm seemed in no great rush to get the job done which was understandable given the rather dislocated state of the equity markets over the past six months and the strength of the corporate bond market

Ardagh funded its $1.7 billion purchase of the US business of Saint-Gobain’s Verallia glass bottle-and- jar unit through a $1.6 billion bond issue that was was six times oversubscribed , according to Bloomberg.

As far as the IPO goes time would now appear to be Ardagh’s friend in many ways. Not least because it will allow the company to integrate its latest acquisition into its existing US operations .

Ardagh will have sales of more than €5.4 billion after buying Verallia and expects to generate $85 million of annual savings and benefits in from the deal. Most of the savings and benefits will flow from the combination of Verallia with Tampa, Florida-based Anchor Glass Container , which Ardagh bought last year for $880 million.

Holding off on their IPO for another nine months should also allow Ardagh reap the benefit of an expected acceleration of the US economy. Verallia’s customers include Anheuser-Busch InBev , Coca-Cola and L’Oreal, all of whom are directly exposed to the US consumer goods sector. Ardagh should also get something of a double whammy in this regard as the appetite for IPO’s should sharpen as the economy recovers.

Some of the IPO proceeds are earmarked for debt redemption but Coulson’s bondholders seem happy to go along with his strategy, although its worth noting that the new indicative timeframe for the IPO came via an update to debt holders indicating that some at least want clarity over their exit.

But all in all Couslon’s timing looks excellent which is no surprise as it has become something of a trade mark.

Chips are down as Intel struggles to adapt

The news that Intel is likely to record another fall in sales – the third straight quarter – isn’t doing much for the tech company’s image.

The chipmaker, which was once the darling of Wall Street and turned in quarter after quarter of growth that kept investors happy, is finding the current economic environment a little more challenging that it is used to.

The blame can be laid firmly at the feet of tablets and smartphones, or rather the demand for them. Consumers are snapping up the devices in huge numbers at the expense of more traditional machines. While others were busy adapting their business model and getting in with mobile device makers, Intel had less success, and it has fallen behind rival Qualcomm as a result.

And although its chips are still used in 80 per cent of the world’s PCs, the demand for the machines is falling off in the face of competition from more mobile devices. Although Intel tried to generate some buzz with Ultra Books, it hasn’t been as successful as it would like, if figures from iSuppli are to be believed.

So it’s a tough road for Intel to follow. The chipmaker this week said sales in the current quarter may decline, coming on the heels of a 3 per cent drop last quarter and a 5 per cent fall in the September quarter.

Intel notched up sales of $13.5 billion last quarter, and $2.47 billion in profit. But it still plans to invest about $13 billion in new plants and equipment this year.

Intel is trying to address its shrinking market issues. It is slowly inching its way into the smartphone market (the Motorola Razr is the first Intel-powered Android smartphone available here) and it recently announced its next generation of chips aimed at the mobile and tablet sector.

At the International CES in Las Vegas last week, Intel unveiled Lexington, a platform for smartphones that will aim at the lower cost end of the market.

Its new focus, coupled with chief executive Paul Otellini standing down in May 2013, will be a year of change for the high-tech manufacturer.