Newcomer Comb plots a smart course through tangled sector

The Eircom chief executive isn't apologising for deciding to cut off Smart's service, writes Arthur Beesley, Senior Business Correspondent

Eircom's new chief Rex Comb is the man who took the decision to cut Smart Telecom's connection to its fixed-line system last Monday. He's only weeks in the top seat, but he didn't yield on Smart for a moment.

Nor will he apologise or take any blame for the affair.

Some 45,000 of Smart's personal and corporate customers had their outgoing call service cut without warning. Yet Comb rejects the analysis that casts him as a hardline Australian newcomer keen to make his mark. He says the fault lies with Smart, which has an unpaid bill of some €4 million with Eircom. "I'd hate to think that I'm seen as belligerent . . . I'm really taking the counsel of people who are working here.

"I think the chief financial officer has been working closely with Smart over the last month and some time ago went to the court to put a bond in place. And really, he's been doing a very good job of trying to work through the mire and I'm listening to what he's saying to me and I don't disagree with him on anything."

Many outside Eircom might disagree, but, in his first newspaper interview since joining Eircom last month, Comb maintains that Smart's difficulties arose solely because its business model is flawed. Eircom had no option but to act, he insists. "As a consequence of that, we gave them a termination notice four weeks ago which was then extended and extended.

"There's a way through this, they kept telling us. And then, to cut a long story short, when you're losing €100,000 a day, €90,000 a day, the question is: how long can you continue? The question is: how will competitors of Smart feel if we continue to do that?"

Comb didn't expect to come to Ireland when he joined Australian investment fund Babcock & Brown from logistics company Linfox. The opportunity arose when the fund bought Eircom this summer for €2.36 billion. He was chief executive of Babcock & Brown Capital, an affiliate of the overall fund which is listed on the Australian Stock Exchange.

An upbeat character who speaks with an unmistakeable Aussie accent, he replaced Dr Phil Nolan as chief executive four weeks ago. Nolan is every inch the middle-aged man of commerce. His hobby is golf. Comb looks more like a burly rugby player - and at 43, he could be a generation younger. On Sunday mornings, he thinks nothing of taking an 80km cycle.

No surprise then that the new man seems to have abundant energy. He declined coffee at our early morning meeting, which had been arranged before Smart was cut off. And when doubt arose over a detail, he raced off for a file and came back in a jiffy.

Comb is a top-floor man now, but he started out on the shop floor. Unlike most in the corporate fast-lane, he left school at 14. His first job was in a dairy. He grew up in Melbourne and the dairy was in a "pretty tough" area called Broad Meadows.

"I worked there for three or four years and went back to school as a mature student when I was about 18, and then did a degree and worked for umpteen years, and ended up doing a masters as well."

Comb was chief executive of Linfox in Melbourne, which had a turnover of $1 billion Australian dollars (€587 million). Before that he was head of the Australian unit of US toymaker Mattel.

For the moment at least, he is preoccupied with plotting a new strategy for Eircom, whose flotation in 1999 still lingers as a bitter experience for hundreds of thousands of private investors who lost money in the telecoms group. After a dizzying round of corporate action in just seven years, Babcock & Brown is Eircom's fourth owner since privatisation.

If the company's tardy introduction of broadband has been characterised as a classic example of the supremacy of private profit over public good, Comb is not at one with those who argue that Eircom's network was run into the ground while its various owners lined their pockets. "I disagree. The fact is that the network would be falling over every day."

Indeed, Comb argues that the "fault rate" in the core system would be much higher than the norm if underinvestment was a problem. It isn't, he says.

Comb's stance on broadband is similar to that of Nolan in that he says it simply isn't economic for Eircom to enable the 700 phone exchanges that constitute the final 25 per cent of lines, most of which are in rural areas.

Doing that would cost €70 million, Comb says. "It doesn't matter what the take-up would be because we would never get a payback." The solution should encompass a measure of public funding via public tender. He believes the Government is amenable to a solution but he says "nothing is finalised".

Eircom executive chairman Pierre Danon has said the new owners plan to increase capital expenditure, but Comb argues there may be no need to increase the spend because the price of equipment is declining.

At issue for Comb is the extent to which the copper wire system that links exchanges to homes and offices should be upgraded to fibre standard. This will be consumer-driven, he says.

"You've got to start with consumers and work backwards."

Comb maintains it will be feasible within three or five years to split Eircom's networks division from the retail arm which sells fixed line and mobile services. That depends on Government and regulatory support, but he says such a split could achieve equal access to the backbone network for all players. In return for unfettered control of the network, Babcock & Brown would sell off its retail arm while holding on to the network. "Babcock & Brown are long-term holders of infrastructure assets."

After paying handsomely for Eircom, no one thinks the Australians will go down that path for the sake of charity. But Comb echoes his colleague Rob Topfer, now an Eircom director, who says such a development would be the optimum solution for Ireland.

"I think that again we should start with the customer and work backwards," he says. "The question for Ireland is where does it want to be in the future."

The flipside of a split is the likelihood that the the company's commitment to local loop unbundling would have to be dropped. The Government and the EU have been wedded for years to that policy, so such a move would be hugely sensitive. It's safe to say, too, that numerous rival telecoms groups will want to have their say.

These include Smart, which has long argued that Eircom's staunch defence of its network has frustrated its own development. Still, Comb says agreement is possible in the context of a rational debate and a "goodwill attitude" on all sides. "It depends on the engagement."

After this week's events, the engagement will not be easy.