Eircom reports flat earnings to September

A STRONG focus on cost containment enabled Eircom to report flat earnings for the three months to the end of September in spite of a 5.6 per cent decline in revenues.

However chief executive Paul Donovan warned that he saw no signs of growth or increased spending by customers in the medium term as the recession continues to weigh on the business.

Mr Donovan also said Eircom’s net debt remains high and reiterated that the company may breach its financial covenants within 12 months.

“We continue to review our options,” he added.

Eircom first warned about a breach at the publication of its full-year results in August.

He said the company continued to discuss its options with its shareholders, Singapore-based STT and the employee Esot. He declined to say though if they would inject fresh equity into the company.

Negotiations with its borrowers on altering its covenant or refinancing its debts were more about the future outlook for the business than the difficulties that the Irish Government and our banks have had in securing external finance, Mr Donovan said.

Eircom has debts of more than €3 billion.

The recession has hit virtually all of Eircom’s units. Its fixed-line business lost 20,000 lines in the period – an average of 1,500 a week during the quarter.

Voice traffic fell by 12 per cent year on year while mobile revenues and profits also fell.

Revenues declined by 5.6 per cent to €442 million in the three months to the end of September but its operating costs fell by 8.7 per cent to €274 million. A net 117 workers left the business in the quarter, double the number for the same period of 2009.

Eircom has reduced its headcount by 1,675 since March 2009.

This reduction in operating costs helped Eircom to report adjusted earnings before interest, tax, depreciation and amortisation of €168 million in the quarter. This was flat when compared with 2009.

Mr Donovan said talks with its unions on achieving a saving of €90 million in its labour costs over the next three years were active.

He declined to say when they would conclude but described them as open and constructive.

The company has already agreed a restructuring of its information technology needs, which would reduce the number of locations from 80 to 12.

This involves integrating its fixed-line and mobile IT platforms.

He declined to quantify the savings this would yield but said they would be substantial over time.

Commenting on the likely effect on business of the Government’s four-year austerity plan and the upcoming budget, Mr Donovan said: “People will be tightening their belts by two notches, not one.”

He declined to say how many subscribers eMobile had signed up since its launch seven weeks ago “but we’re very pleased with the progress it has made”.

Unlike its Meteor mobile brand, eMobile is targeted at Eircom’s fixed-line customers, offering them bundled mobile, voice and data packages.