“Any thoughts on Eircom/Vodafone shares,” begins a mail from Daniel, a reader whose family “bought a small amount of shares on issue”.
He says that they have turned out to be a “nuisance” – a kind word to describe them.
He says there are a nuisance because his family continue to “get more paper than the tiny dividends are worth. I am pretty sure the cost of selling them outweighs the benefit and so the post and pennies continue intermittently.”
He reckons his family are “not alone in having a bad aftertaste of Eircom”.
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He is right on the money about what must rank as one of the biggest financial scandals to hit this country in the past 50 years – and there have been many such scandals.
If you don’t remember exactly what happened, don’t worry, we have you covered.
In the 1960s, 1970s and 1980s, Ireland had one of the worst telecoms systems in Europe.
People were left on waiting lists for landline installation for months, if not years, and when those fabled points of connection were eventually installed, the cost of making calls was high.
People were also expected to pay the equivalent of about €400 in line rental charges a year.
It was almost as expensive as leaving the immersion on.
Things began to change, slowly at first, in the 1980s when we didn’t have a shilling to our name.
In 1983 the P&T (Posts & Telegraphs) became Telecom Éireann and a rapid modernisation programme began with the network morphing from one of the worst analogue systems in Europe to one of the more advanced digital ones before the end of the decade.
Much of the improvement was prompted by a recognition in government circles that if Ireland wanted to attract foreign direct investment from start-ups such as Microsoft and Apple, it would need to have the infrastructure in place.
Telecom Éireann started strongly and its mobile arm, Eircell, started growing from 1986 – although very slowly at first. In the early 1990s it was the only mobile phone operator in Ireland and served its small customer base with the 088 prefix.
Fast-forward to the end of the 1990s when the Celtic Tiger was growling and Telecom Éireann was suddenly hugely profitable.
The shares are still worth considerably less to the poor unfortunates who drank the Kool-Aid (having been effectively force-fed the stuff by various arms of the State)
It was so profitable that Cable and Wireless – a UK company – wanted to buy it. That prompted a high-profile anti-privatisation campaign led by the unions at the company, which ran with slogans such as “Don’t let the fat cats get their claws on telecom” and “If they privatise telecom, who gains? The fat cats.”
The C&W fat cats scarpered but a decision was taken to privatise Telecom Éireann regardless.
Guess what? The only ones to win were some very fat cats.
It was a wild ride before that. About three million people on the Electoral Register were sent letters detailing how they could play the stock market and buy shares (in a company they already owned, but you probably know that already).
Banks and credit unions were falling over themselves to lend people money to buy those shares. The money they were lending wasn’t free, and if they were charging rates of interest of about 10 per cent it meant that, for such a transaction to make any sense, the share price would have to climb by at least that percentage over the first 12 months.
Such details were overlooked by many of the nearly 600,000 people who spent an average of about £7,000 (more than €15,000 in today’s money) on July 8th, 1999.
That was the day the company suddenly known as Eircom was floated on the London, New York and Dublin stock exchanges at a price of £3.07.
More than €6 billion was raised by the sale and much of it was invested in a State pension fund (which would ultimately be plundered during the crash).
Things quickly started to go south for the shareholders who did not sell quickly enough.
Within a year the company had lost more than a third of its value, and management had sold the family silver in the form of Eircell to Vodafone.
There was then leveraged buyout by a Tony O’Reilly-led consortium that saw the company burdened with a huge amount of debt, and another takeover by Australian financiers Babcock and Brown, which saw more debt added to the company’s balance sheet and its value fall precipitously.
Less than 15 years after the company floated and was valued at more than €6 billion, it was in the High Court seeking examinership and valued at – effectively – nothing.
While Pricewatch has not written about Telecom Éireann or Eircom before, our colleague Dominic Coyle has written about it on many occasions and frequently does some dizzyingly complicated calculations to explain how much the Eircom shares that were converted into Vodafone shares are now worth and what the financial impact of selling them might be.
We won’t revisit that here but the bottom line is that the Vodafone shares that were once Eircom shares are still worth considerably less to the poor unfortunates who drank the Kool-Aid (having been effectively force-fed the stuff by various arms of the State) and they are all still much worse off than had they not bought the shares in the first place.
Readers’ experiences of Eircom shares
After reading Daniel’s mail we were curious about the experience of others. We took to X and asked users if they had bought shares and if they had made or lost money on the endeavour.
Some people who responded did make money – but not many.
- “I bought £300 worth or whatever the lowest amount was and lost on them, sold when they transferred to Vodafone, worth very little,” writes Deirdre. “A businessman up at director level borrowed money to invest in them and sold them quickly. He’s the only person I knew who profited from them.”
- Donagh also “bought and lost. As far as I recall the only people who made money were the ones that sold on the day of issue”.
- Terry bought a €1,000 worth “and eventually sold them for €300. What a sham that was”.
- “A lot of people sold on day one and made money. I wasn’t one of them though,” writes Fionbarra. “Cut my losses eventually. Win some, lose some.”
- “My late father bought for his and my mam’s future retirement,” writes Karen. “And he lost it all, like so many. It was so sad.”
- “I spent €5000 and they are now worth less than €500,” says Maura.
- Michael: “After discovering I’d been had, I never did anything with them. When they converted to Vodafone shares, never cashed any of the €1.20 dividend cheques, never read the annual report, or voted the directors (in or out) by proxy, or attended the London agm. Shirt long lost.”
Michael seems to be in the same position as Daniel, which takes us to his closing idea of setting something up some kind of altruistic scheme that would allow people to dispense with the shares they still have in a tax-efficient way with the money pooled and used for a charitable cause.
At least that way something good – even if it was something small – could come out of the shambles. But just how such an idea might be implemented is beyond the power of Pricewatch so, instead, we’ll just put it out there and maybe someone smarter than us could come up with a plan?
