Eircom's owners are examining the possibility of splitting the telecoms group into three or even four separate units when they move ahead with the formal separation of its network from its customer service divisions, writes Arthur Beesley,Senior Business Correspondent
There are certain issues under scrutiny at present: the feasibility of creating a core network operation for wholesale clients; a retail offering for domestic and mobile users; and a business offering for the commercial sector. The creation of four divisions by separating the mobile unit, Meteor, from the rest of the retail arm is also being considered.
Such options are more complex than a simple two-way split between the network and service divisions, previously assumed to be the company's prime objective. However, they might provide greater scope to maximise the return from the sale of some operating units.
The separation of the business is anticipated in the shareholder agreement between the telecoms group's majority shareholder Babcock & Brown, the Australian investment fund, and the Eircom employee share ownership trust, which has a 35 per cent stake. The ultimate division of assets between the shareholders has yet to be agreed.
Babcock & Brown's objective is to sell off the customer service units while retaining long-term control of the network, which would be run as a piece of infrastructure with equal access for all service providers.
Such a development is anticipated in the Programme for Government agreement last June by Fianna Fáil and its coalition partners. This commits them to "encourage the separation of Eircom's network from its commercial retail business into a separate entity" overseen by ComReg, the sector regulator.
However, Eircom argues this cannot be achieved without ComReg moving to a "cost-plus" pricing model for suppliers accessing wholesale network services. Such a method applies a mark-up over the cost of providing wholesale access, in effect guaranteeing a certain return on investment in the network.
This is distinct from the "retail-minus" model employed at present, under which the wholesale price is determined by way of a fixed discount from the retail price of the service.
ComReg is recruiting consultants to advise on a separation process, which it has already termed "the Project", but has indicated that they may be required for up to three years.
Eircom wants to move sooner than that.
The company is likely to intensify efforts in the new year to persuade the Government and ComReg to introduce a "cost-plus" regime within 12 months. Some close observers believe the company might move much sooner than that to execute the separation of its business.
