Eircom operating profits dip 27%

EIRCOM said the weak economy is putting pressure on the company as it reported a 27% fall in operating profits to €69 million in the third quarter of the year.

Profits at its mobile arm Meteor were up 17% to €35m, although revenues fell 2% to €117m due to lower sales from pre-paid customers.

Meteor had just over one million subscribers at the end of March, down 8,000 from the December figure.

Eircom said it is making good progress on its cost restructuring programme and it has further cost reductions planned.

It said earlier this month that it will reduce its staff numbers by 1,200 by June 2011 through “a reduction of certain activities and efficiency improvements”.

It also said it was implementing a two-year pay freeze and reducing staff allowances by 25%.

The company claims it needs to save €130m per year in 2010 and 2011 in order to remain viable.

Eircom said it reached an “accord” with unions this month over a plan to reduce Eircom’s headcount, as well as introduce a pay freeze and a reduction in allowances.

“Stage 2” discussions with the unions are under way to agree further cost savings and measures to correct the €433m deficit in eircom’s pension scheme, the company said.

In its third-quarter results yesterday it said the economic downturn is leading to pressures on volumes and prices.

It reported a successful launch of its mobile broadband offering, gaining 7,400 customers in three months.

Eircom is embarking on a phased roll-out of its mobile broadband service and it expects national coverage by December 2010.

“Investment in new fixed and mobile networks and services over the past three years positions eircom well to reduce costs and deliver value to customers,” the company said.

On its broadband offering, eircom said that as of March 60% of its retail subscriber base were on 3Mb, which is up from 12% in July 2008.

The number of eircom broadband lines are up 15% in the year.

Eircom saw 19,000 new DSL broadband subscribers join up, but not as much as the 25,000 yielded during the second quarter and 37,000 during the third quarter, indicating the recession is hurting broadband subscriptions.

The company, which is currently up for sale, with interested parties understood to be ranging from France Telecom and Singapore Telecom to Irish entrepreneur Sean Melly, last week appointed former Vodafone Ireland chief Paul Donovan to the chief executive position.

Eircom also said it continues to meet its quarterly banking covenants.