EIRCOM WORKERS have been told by their union leaders the heavily indebted telecoms group could be taken over by its lenders if they do not agree to implement the €92 million in labour savings outlined last week in its rescue plan.
The warning came from the Communications Workers’ Union (CWU), which represents the majority of Eircom’s 7,170-strong workforce.
“Your executive is now satisfied that if the present financial position of the company is not addressed as soon as humanly possible, then ultimately the company is likely to be taken over by the banks and bondholders,” the CWU told its members last week.
In addition, the CWU leadership said it had been made clear to the union that Eircom’s shareholders – Singapore STT and the employee Esot – would only invest in the business if they were confident of making a return on their money.
“It has been made quite clear to us by both shareholders that any investment either in the debt area or in infrastructure can only happen in circumstances where there is a real prospect of making a return on that investment.”
It has been suggested that STT and the Esot might invest up to €300 million in Eircom as part of the restructuring of the business.
“In a nutshell, the choice for our members is to let the situation continue to deteriorate and take our chances with the bankers and the bondholders, or accept a difficult agreement that gives us hope for the future,” the CWU said.
Eircom last week said it could breach its covenants on its €3.8 billion net debt by the end of August due to pressure on its revenues and earnings.
Eircom’s revenues declined by 6 per cent in the six months to the end of December 2010, and it shed customers in both its fixed-line and mobile divisions.
The company, led by chief executive Paul Donovan, said it would hold talks with its lenders in March or April to seek a resolution to its “financial position”.
There are four different categories of lenders to Eircom, and the company and its advisers are expected to aggressively seek to reduce its borrowings, possibly by €800 million or more.
The rescue plan is a key part of Eircom’s restructuring. It was agreed in principle by management and unions last week and involves achieving cost savings of €92 million by 2013.
This includes a 10 per cent pay cut across the board for an 18-month period and a pro rata reduction in working hours; changes to work practices and a restructuring of business units, and additional voluntary redundancies – with more than 1,000 staff expected to exit the business.
The CWU acknowledged the proposed agreement was the “toughest” that it has “ever had to deal with in its long history”.
“Hopefully, in the future it [Eircom] will sustain the highest possible number of jobs, while creating a longer-term future for our members and for those members who come after us,” the CWU added.
The CWU’s national executive met yesterday with branch delegates in the Gresham Hotel in Dublin to discuss the rescue plan. A series of information meetings for members is to be held over the next week or so.
It kicks off with a meeting in Croke Park on March 10th for Dublin-based members working at Eircom. Meetings are also planned for Portlaoise, Waterford, Cork, Limerick, Galway and Sligo, and conclude in Kells on March 16th.
Ballot papers will be circulated on March 15th and workers will have until March 30th to cast votes. The CWU’s national executive has unanimously recommended the proposed agreement.
Eircom wants the restructuring measures fully implemented by July 1st.