Eircom reports fall in Q3 profits

EIRCOM has reported a fall in third-quarter profits despite newly-acquired mobile arm Meteor adding more than 100,000 customers.

Pre-tax profits in the three months to end December 2005 dropped to €24 million from €39m. The company said competition from rival phone operators and increased investment in broadband services were behind the decline in profits.

Revenues for the period were €424m, compared to €399m in the third quarter of 2004. The company said much of the increase was due to the inclusion of one month’s revenue from Meteor, which Eircom bought last year for €420m.

Eircom chief executive Philip Nolan said Meteor put in a “stellar performance”, increasing its customer base by 100,000 in the third quarter to 565,000. The company said Meteor now had a 14% share of the mobile market.

The Eircom figures reveal that Meteor is much cheaper than rivals Vodafone and O2. According to Eircom, the average revenue per Meteor customer is €38 a month compared to more than €50 at the other two main mobile networks. The purchase of Meteor and the company’s investment in broadband internet access is key to Eircom’s growth. The figures show that traditional fixed-line phone services are continuing to fall. During the quarter, local phone traffic volume fell by 10%, while national and international call volumes fell by 5% and 6% respectively as more people opted to use their mobile phones.

Offsetting the decline was a rise in broadband customers to 215,000. It is signing subscribers at the rate of 2,000 a week.

“We are heading for our target of 500,000 broadband customers,” Mr Nolan said.

Although the third-quarter results were below the target of many analysts, Mr Nolan said the company was in positive shape. “I believe that Meteor results are stellar and that has given us a real beachhead in [the] mobile [market] from which I think we can develop a significant market share.

“In the fixed-line business, strategically we are driving broadband, we are defending our market share pretty well.”

On the cost side, the investment in marketing and discounts offset a 5% fall in the company’s wages and salary bill. This was caused by a reduction in the number of employees to 7,258, a cut of more than 180.

Eircom would make no comment on speculation that one of its largest shareholders, Babcock & Brown, was preparing a takeover bid.