Eircom needs a hero
Company needs shareholders willing to take long-term view to unlock potential
“If Eircom were a football team, it would probably be Liverpool. Its heyday was 20 years ago and it’s been overtaken by a number of foreign-owned rivals with deep pockets.” Photograph: Eric Luke
On the face of it, the idea that Eircom might once again list on the stock market seems ridiculous. In recent months, it has appointed a clatter of corporate advisers to advise it on its strategic options. Top of the list appears to be flotation, with reports it is planning a dual listing in Dublin and London in September with a view to raising €1 billion, which would be used to pay down its debt.
Just two years ago Eircom was banjaxed financially after Singapore-based investment group STT decided there were greener fields to plough elsewhere and walked away from its modest equity investment to leave the company’s bondholders, who were owed €4.08 billion, to decide its fate.
Eircom required the support of the High Court to protect it from its creditors in what was the biggest examinership in the history of the State.
In March 2012, on appointing an interim examiner, Justice Peter Kelly said the telco was insolvent in a “very substantial way”. The judge said Eircom’s history since its privatisation in 1999 “made for sad reading for this State and its citizens”.
“Over the following years, the company changed hands on a regular basis. One could be forgiven for thinking that it became the subject of a game of corporate ‘pass the parcel’. But this was a game with a difference. On each occasion that it was played, the players won (on occasions handsomely) and it was the parcel, namely the company, that lost,” the judge added.
Eircom became something of a pyramid scheme for investors with the result that its later owners, Babcock & Brown and, to a lesser extent STT, got burned.
Arguably, the biggest loser in the pass-the-parcel game was the customer. There’s a myth that Eircom was a great company until the State sold it to greedy private investors. That’s nonsense. In State hands Eircom was a bloated, inefficient monopolist.
After privatisation, it was starved of investment and customers suffered poor quality phone and broadband services. It was run for the benefit of staff more than the consumer. I know this because so many current and former workers have told me.
Eircom employees earned €940 million tax-free over a number of years from the privatisation and held one-third of the equity of the business before it collapsed into examinership. They had a big say in how it was run and their representatives on the board must share the blame for the mess.
Like sport, business moves at such a pace companies can fail spectacularly but bounce back a few years later. Bank of Ireland could have gone out of business in 2008 but is now back in profit and generating capital, and music retailer HMV has gained a new lease of life under new owners.