Eircom chief to get €3.7m in IPO

The chief executive of Eircom, Dr Philip Nolan, will get share options worth in the region of €700,000 when the company floats on the stock market later this month.

The bulk of the options will be priced at close to flotation price of between €1.48-€1.75. Their value will increase significantly as the share price appreciates.

The value of Mr Nolan's existing shares in the company will increase by €3 million when the company comes to the market with a capitalisation of between €1.1 billion and €1.3 billion.

Mr Peter Lynch, the chief financial officer, and the head of retail operations, Mr Cathal Magee, will get packages worth around half as much as Dr Nolan. Mr David McRedmond, the commercial director, will also get shares and options.

Mr Con Scanlon, the vice chairman of the company and general secretary of the Communications Workers Union (CWU), will get a grant of 330,000 shares, worth in the region of €500,000. Details of the award to the directors will be disclosed in the prospectus for the flotation which is to be published today.

Mr Scanlon, who is a member of the executive council of the Irish Congress of Trade Unions (ICTU), is also the chairman of the Eircom Employee Share Ownership Plan Trustee Ltd (ESOT), which holds 30 per cent of the company on behalf of past and present staff. As chairman of the ESOT, Mr Scanlon was instrumental in determining the outcome of the battle to take control of Eircom in 2001.

The support of the ESOT for Valentia's bid effectively ended the chances of a rival bid from Mr Denis O'Brien's eIsland. He negotiated an increase in the ESOT stake from 15 per cent to 30 per cent, and two seats on the company board as the price of the ESOT's support.

Mr John Conroy, the chief executive of Merrion Capital Group, who also represents the ESOT on the board, will also get shares as part of the flotation.

The six incoming non-executive directors - and the non-executive chairman Sir Anthony O'Reilly - will not get share options in keeping with corporate governance norms. Because they represent the interest of a major shareholder, Mr Scanlon and Mr Conroy are not deemed independent directors.

The prospectus will also disclose a pension payment of €70,000 a year for the next 10 years to Mr Scanlon. The total package is understood to be worth around €1 million and was negotiated following Mr Scanlon's early retirement from Eircom last year. He will continue to receive a fee of around €100,000 for being deputy chairman.

Mr Scanlon retired from Eircom because of the potential conflict between his multiple roles at the company. His CWU salary is pegged to the assistant secretary grade in the civil service which ranges from €92,000 to €106,000.

The generous remuneration deals struck by the company's four executive directors will also be disclosed. Dr Philip Nolan, the chief executive, is on a basic salary of around €700,000, while the chief financial officer, Mr Peter Lynch, and the managing director of the retail business, Mr Cathal Magee, earn around €450,000. Commercial director Mr David McRedmond earns €320,000.

The four men received substantial payments following the refinancing of the company's €2.2 billion debts last year. Mr Nolan got €5 million, Mr Lynch got €2.1 million, Mr Magee got €2 million and Mr McRedmond got €1.5 million.

Mr Nolan also got a €2 million signing-on bonus and shares when he joined Eircom in 2001.

The company yesterday published its figures for the nine months to the end of December 2003. Turnover in the last quarter of the year slipped by 5 per cent to €402 million due primarily to reduced voice traffic volumes.