Q & A

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.

Eircom

Where many people this week posted their acceptance of the eIsland offer as advised by the board in a letter sent with the plethora of paperwork, does this exclude them from accepting the new Valentia offer?

Mr M.MacG., e-mail

No, but you will have to go about withdrawing your eIsland acceptance first. Of course, once the eIsland offer is withdrawn by the consortium or fails to get enough support to gain control of Eircom with the 42-day timeframe allowed by the Irish Takeover Panel, its bid lapses and you are free to vote as you choose once more. With eIsland having to bid above €1.50 a share (compared with the current Valentia offer of €1.365) to wrest the 35 per cent stake owned by Comsource from Valentia and with the ESOT holding firm to its anti-O'Brien line, one or other scenario is pretty certain.

In any case, it is not something to get too worked up about just yet. As it stands, either the eIsland bid will fail allowing you back into the market or Valentia will in any case win enough support to compulsorily buy your shares at its offer price.

SSIAs

My husband's job could involve relocation to another EU country - at the moment I'm working and living in Ireland but could have to move in the next six months. Would I be entitled to open a Government savings scheme account and continue to contribute it for the full five years, even I was out of the country for a lot of that time?

Ms H.B., Dublin

No, not beyond a certain time limit. Even if you were ordinarily resident, rather than simply tax resident, you would only be able to pay into a special savings incentive account for three years after leaving the State. Beyond that, you would be forced to close the account and be hit with a tax charge - currently 23 per cent - on everything in it. You are talking about being out of the State for up to four-and-a-half years. That sort of time would rule you out in any case.

Vodafone

I refer to your advice last month on working out the value of your investment in Eircom now that the group has been broken up and sold off. You do not mention the one free share per 25 held and issued July 2000. I calculate that this would on paper reduce the outlay to purchase the shares from €3.90 to around €3.70. I find that most commentators overlook this apparent reduction in cost per share for those who came on board at issue and have remained there since.

Please advise how this pans out in the line of your reply.

Mr B.T., Galway

You're quite right that the calculation made does not include the one free share for 25 bonus granted to those Eircom shareholders who stayed with the company through its first year in public. Including the share does change the figure marginally, but not the net effect - a loss. The bonus was issued on the basis of one free share for every 25 held. The initial outlay for 25 shares was €97.50 at €3.90 a share. After the bonus issue, that €97.50 had effectively bought 26 shares - retrospectively bringing the original purchase price down to €3.75 a share. Of course, by that time, Eircom was trading at €2.84, so the recalculated purchase price probably brought little consolation to shareholders.

Anyway, on the basis of the recalulated share price, the portion of the "new" original price accounted for by the Eircell/Vodafone portion on the day both parts first traded following the split was €2.18175. The value of what was left of Eircom - the business now being sought by Sir Anthony O'Reilly and Mr Denis O'Brien - was €1.56825.

On the basis of the current top bid - the €1.365 per share being offered by Sir Anthony's Valentia consortium - the loss per share would be 20.325 cents per share.

Two things to remember. As I said in the original answer, the Revenue has yet to determine exactly which of the several prices both Vodafone and Eircom traded at on May 14th to take as it benchmark - a figure that could affect the calculation. Second, the above net loss per share assumes people bought multiples of 25 shares originally. Of course, they didn't. The shares were bid for by cash amount, not by number of shares sought. Those people holding a number of shares not divisible by 25 will suffer a marginally greater loss per share in the illustration above.

In your column re. Eircom/Vodafone you show the Vodafone shares as trading between €1.4866 to €1.56 (allowing for sterling conversion) on May 14th, 2001. According to my figures taken from The Irish Times of 15th May 2001, the price should be €3.08, based on the following calculations: Vodafone share price = £1.90 sterling divided by 0.7825 = £2.428 x €1.269 = €3.08. Kindly check out the above calculation and let me have your comments.

Mr W.R., e-mail

The trouble with covering a story over a prolonged period is that you tend to assume everyone knows/ remembers as much about it as you do. That can confuse readers, which is exactly what has happened here. My figures are correct, but only when you take into account the fraction of a Vodafone share that each Eircom/Eircell share was worth. For each Eircom/Eircell share you owned, you got 0.4739 of a Vodafone share. In other words, the €1.4866-€1.56 price quoted in the newspaper was the price of that portion of each Vodafone share you would have got for each of your Eircom/Eircell shares. I should have made clear that the price quoted was for the relevant fraction of each Vodafone share.

One other minor point, the European Central Bank, the Central Bank and the Euro Changeover Board have all stressed that, when working out euro conversions from euro-zone currencies, like the pound, you must use the full six-digit conversion figure. Similarly, for accuracy, you should convert directly to the euro - in this case from sterling - rather than going through a second currency - in the case of your question, the pound.