O'Brien takes a knife to cost base

BRIAN COWEN could do worse that appoint Denis O’Brien as minister for cutbacks judging by the speed at which he has slashed costs at his radio and mobile phone empires.

At a recent breakfast hosted by the Dublin Chamber of Commerce in the Gresham Hotel, Lucy Gaffney, a long-serving lieutenant of O’Brien, detailed how, before Christmas, Communicorp executives took out the 2004 profit and loss accounts to compare the costs then with projections for the radio business this year.

“We nearly died,” she said. “We realised that we’d let the boom and the [Celtic] Tiger get to us and we had grown too much.”

So this year’s budget was pared back to 2004 levels.

Communicorp didn’t mess about. Over a two-week period before the festive break, the company took a large knife to its cost base, taking out 140 jobs or 10 per cent of the workforce.

“We expect our ebitda to go down by 10 per cent [this year] but it could have been by 30-40 per cent had we not acted,” she added.

All cost lines were trimmed, bar marketing. It also merged its newsroom activities at national stations Today FM and Newstalk, in spite of “whingeing from the BCI [Broadcasting Commission of Ireland]”.

“Don’t have a slow death . . . just do the deed and get the maximum benefit,” was Gaffney’s advice on cutbacks.

Communicorp has even appointed “champions” in each business to take responsibility for cutting costs, everything from newspaper subscriptions to ordering stationery. These “champions” are reviewed every two weeks to make sure they are hitting their targets.

Overall, Gaffney expects the radio advertising market to “tighten” by 15-17 per cent this year, roughly half the level of TV and print media.

Gaffney is also a board member of Digicel, O’Brien’s Caribbean- based mobile phone group. It recently reduced its workforce by 10 per cent through voluntary redundancies, even though it expects to hit its financial targets.

“We still thought it was the right thing to do,” she said.

It has also reduced the incentives offered on mobile handsets, which Gaffney said would generate $30-40 million in extra revenue – handy money given its plans to launch in six or seven markets by the end of this summer. “We need cash to do that.”

O’Brien is also doing his patriotic duty by instructing each of his Irish radio stations to carry at least one positive news story in each bulletin - “positive discrimination”is how Gaffney described it.