Eircom in the red after early debt clearing

EIRCOM has gone into the red, suffering an after-tax loss of 10 cents a share — €108 million in the three months ending June 30 last.

This follows a jump of €156m in financing costs arising from the early repayment of company debt. This loan restructuring is related to the takeover by the Babcock & Brown consortium which is due for completion later this month.

While total revenues rose by 21% on the corresponding quarter last year to €483m, operating profits actually fell from €112m to €81m during the period in question.

Net cash flow dropped from €146m to €130m.

The 2006 quarterly figures include a €13m quarterly revenue contribution from the mobile phone company Meteor, which Eircom acquired for €420m in 2005.

The mobile subsidiary’s subscriber base passed the 700,000 mark in July.

This compares with a figure of 625,000 at the end of March.

Meteor’s share of the market has reached 16% and it is beginning to mount a challenge to Vodafone and O2 which have, until recently, been operating almost as a duopoly in the mobile phone marketplace.

Eircom’s DSL broadband base reached 260,000 by the end of June and the company signed up another 14,000 customers over the first four weeks of July.

Eircom, BT and Smart Telecom are engaged in a fierce battle to sign up new customers, though both the incumbent players and the Government continue to ship heavy criticism over Ireland’s relative lack of broadband penetration and the slow speeds of connectivity in installed households.

BT recently launched a new all-in rental, phone call and broadband package in an effort to woo customers.

Revenues from fixed-line business barely moved, in real terms, edging up by 4% on the corresponding quarter in 2005 to €415m.

Total mobile services revenues on the other hand amounted to €80m in the latest quarter, compared to nil in the three months to June 30 last year.

A deduction of €12m for intra-company eliminations left total revenues for the quarter at €483m.

Eircom’s capital spend rose modestly to €74m from €59m during the same period in 2005 — much of the increase relates to the acquisition of Meteor.

Total operating costs jumped from €264m to €319m in the latest quarter.

Most of the increase was due to the inclusion of the cost of running Meteor.

Staff numbers continue to fall. The headcount at June 30 last stood at 7,071, down from 7,263, a year ago. The number of agency staff employed also plummeted from 325 to 79.

Total staff costs rose by just 1%. Fixed-line staff costs actually fell by 9%. However, this drop was due to technical reasons.

When these are stripped out, fixed line staff costs jumped by 9%, mainly due to increased overtime payments.