IN LATE afternoon yesterday, the board of Eircom concluded a two-day meeting at the company’s headquarters near Heuston Station in Dublin. It could yet prove to be pivotal to the company’s future.
It is understood that acting chief executive Cathal Magee received the backing of the board to press ahead with appointing a corporate adviser to help it formulate an alternative to Rob Topfer’s opportunistic proposal to take over of what is now known as Eircom Holdings (formerly BCM) for just €95 million.
Eircom is expected to appoint an international group to advise on its strategic options, which won’t include nationalisation.
After three years of Babcock Brown involvement, Magee and others senior executives and board members at Eircom are keen that it takes control of its own destiny rather than having it decided in Australia.
Eircom has already made it clear that the Babcock model has failed Eircom and it doesn’t wish to repeat that trick with Topfer’s latest plan.
Magee has a lot on his plate. He is also working on a plan to shed about 1,200 staff as part of a series of measures to shave €130 million or more annually from its cost base. This includes cutting about 300 jobs from its head office, which won’t be easy to achieve.
Talks with the company’s trade unions are believed to be progressing well.
Eircom also needs to invest in its infrastructure – up to €2.5 billion in next-generation technology, according to some analysts.
Eircom’s €3.8 billion debt burden also has to be tackled. This debt is favourably priced – at about 5.75 per cent – but it weighs heavily around the company’s neck.
Contrary to Topfer’s recent assertion, there is no “looming default” of this debt. All of this comes against a backdrop of a sharp decline in business activity. Even mobile arm Meteor, which has been the star performer in recent years, has run into the sand, largely due its focus on the pre-paid market and foreign national customers.
That said, Eircom continues to generate decent cash flow and its 68 per cent share of the fixed-line market remains an attractive franchise.
The meeting was attended by new chairman Andrew Day. The London-based executive had a potentially lucrative exit package blocked by Topfer and his supporters.
Day has a two-year contract although some question how motivated he will be given that his remuneration package was shot down in Sydney this week.
Then again, having just received a bloody nose from Topfer, he has plenty of motivation to deliver a knockout blow to the Aussie’s plans to regain control of Eircom, which would be good news for the Irish business.
