Eircom seen as wary on union plan to up stake

Eircom's management would be likely to block any attempt by the company's staff to increase its stake in the company, industry sources said last night. This would prevent the employees from bringing its stake in the company to one-fifth, and extending their role on the board.

Sweden's Telia and KPN of the Netherlands are selling 35 per cent of Eircom. Under stock exchange rules, any company that bought all of this stake would have to make a bid for the entire company, but a purchase of 29.9 per cent would not trigger such an obligation.

Eircom's largest trade union, the Communications Workers' Union (CWU), said yesterday the Eircom employee share option plan (ESOP) planned to bid for 5 per cent, which could facilitate a strategic partner in taking a minority shareholding.

Such a move would mean an alteration to the deed of trust which governs the ESOP, and any such change would require approval from a majority of the board. In an interview published in yesterday's edition of The Irish Times, the general secretary of the CWU, Mr Con Scanlon, said he did not anticipate any objections to this plan from management.

The purchase envisaged by Mr Scanlon would raise the ESOP shareholding, currently 14.9 per cent, to 20 per cent.

Since the existing 14.9 per cent shareholding is now valued at €2.4 billion (£1.9 billion) - around £95,000 per employee - the unions believe it would be relatively easy for them to raise a loan to buy a further 5 per cent.

Eircom would not be drawn on the issue yesterday.

"The company has not taken any decision to facilitate the ESOP taking more than 14.9 per cent," said the firm's head of corporate communications, Mr Gerry O'Sullivan.

Industry sources said some investors would regard the statement by Mr Scanlon with a degree of suspicion, adding that it could be seen as a defensive move by the union, seeking to increase its power at board level and stave off the possibility of excessive cost-cutting by a new owner.

Logically, such a purchase would double the ESOP's power at board level. Despite union demands before the flotation of the company for two representatives on the board, the Minister for Public Enterprise, Ms O'Rourke, limited the ESOP to one board member. With a holding of 20 per cent, the employees would have an overwhelming case for two board members.