Latest spin of merry-go-round will not be last

If you're feeling a little dizzy, it's probably because you've been trying to keep up with the ownership merry-go-round that is Eircom.

The company that owns most of the fixed telephone lines into the Republic's homes and businesses is about to be taken over by Australian venture capitalist, Babcock & Brown, which is paying €2.252 a share or €2.4 billion for the business.

Less than seven years ago, Telecom Éireann was a State behemoth that controlled fixed and mobile networks. But the Government flogged it in 1999 for €6 billion to the financial markets and 570,000 citizens, who paid €3.90 a share.

Since then, the company that was soon rebranded as Eircom has shifted from a stock exchange-listed company to a privately controlled business and back again at intervals varying between two and two-and-a-half years.

In between, it sold off its mobile arm, Eircell, to Vodafone, against the wishes of its small shareholders, who wound up with Vodafone paper worth about €1.25 for every Eircom share they held. The company re-entered the mobile market last year with the €420 million purchase of the Republic's third player, Meteor, from Western Wireless.

Early in 2002, the Valentia consortium, led by businessman Sir Anthony O'Reilly and backed by merchant banks Goldman Sachs, Warburg Pincus and Providence Equity, bought Eircom for €3 billion.

This deal left the remaining 450,000 or so small investors with a €1.30 loss on the initial €3.90 share price, one-third of their total investment. Assuming they held on to its shares, Vodafone now represents their only hope of recovery.

In March 2004, the merry-go-round swung again. This time, Valentia refloated the business for €1.1 billion, or €1.55 a share. Unlike the first flotation, there were plenty of winners this time.

Sir Anthony, financier George Soros and Providence Equity sold shares worth €500 million. And the workers, who originally held 14.9 per cent through an employee scheme, wound up with 21 per cent, having previously shared a €66 million payout.

The Employee Share Ownership Trust (Esot) is Babcock & Brown's partner in the current deal. It has consistently done well out of Eircom's privatisation.

Many believe that few others have benefited. The vagaries of the market saw to the small shareholders who bought in in 1999. And it has been argued that Eircom's approach to opening up its networks to competitors has slowed the pace of broadband development in the Republic, leaving its customers and the economy at a disadvantage.

This has prompted the Government to threaten intervention.

Nobody knows what the new owners think of all this. But on past experience, it's unlikely they'll be around for long. This merry-go-round hasn't stopped spinning yet.