EIRCOM NOW seems destined to change hands for the fifth time in the nine years since its flotation by the State. Literally billions of euro have been pocketed by a series of owners who loaded up the company with debt while investing the bare minimum in the network that forms the backbone of the Republic's telecommunications infrastructure. Its resulting debts of more than €4 billion mean that Eircom simply no longer has the financial wherewithal to raise the money needed to upgrade its ageing network. It is not a very satisfactory outcome for a State which has pinned a good portion of its hopes on the knowledge economy which takes high speed broadband and advanced telecommunications as a given.
It is possible, but is far from certain, that a change of ownership might rectify this state of affairs. Unfortunately the new approach for the company seems to have been driven more by desperation than long-term planning in that direction.
The latest suitor, LIT plc, is one of the existing shareholders in Eircom's parent, the Australian investment fund BCM, which is currently feeling the full force of the credit crunch. Its value and that of its controlling shareholder, the Australian investment house Babcock Brown, has collapsed over the course of the year.
The approach by LIT is best seen as an attempt to try and salvage its investment in BCM, of which Eircom is the primary asset. Its ultimate objective may be simply to force BCM into play in the hope that another buyer will materialise for all or part of the business
However, things play out, it seems very likely that Eircom will be under new ownership within a matter of months. The issue now - from the point of view of the Government and other stakeholders in the economy - is to ensure that if Eircom has a new owner, it is one capable and willing to make the kind of investment necessary to give Ireland the telecommunications infrastructure it needs.
There is very little, however, that the Government can do to directly influence the outcome of the process that is now in train, although any new owner would be anxious to keep ComReg, the telecommunications regulator, on side. It would be open to the Government to co-invest alongside a new owner, and a decision to ally itself in such a fashion with a potential suitor could be critical to determining the outcome of the process.
The investment could be by way of combining the State's considerable broadband assets developed around regional centres with Eircom's assets, as has been mooted in the past. This would require a reversal of the current policy of not backing any particular company or technology such as fixed-line broadband over mobile broadband. It would also represent a breach of faith with the various other players in the market, particularly the dominant mobile operators.
The consequences of this would have to be weighed against the opportunity to reassert some influence over a vital national asset that has been little short of a plaything of the capital markets for the last nine years.