Eircom in €486m loss in year to June

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.