Eircom job cuts as revenue falls

EIRCOM is to make more job cuts, over the next three years, in light of management identifying the need for further cost reductions.

The former state-owned telecommunications company yesterday posted an 8.5% fall in annual revenue — to €1.8 billion — for the 12 months to the end of June; a result hindered by an 8% fall in fourth quarter revenue to €440 million.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) came in at €669m for the year, a figure which was 3.3% — or €23m — below the 2009 full-year amount.

According to group chief executive, Paul Donovan, Eircom’s results “highlight the work under way and the challenges that remain to return the group to profitable growth”.

While he said that the last quarterly performance was creditable — EBITDA for the fourth quarter remaining stable, on a year-on-year basis — Mr Donovan said that further cost savings “must be found” and annual labour costs will have to be reduced by €90m by the middle of 2013. Management has said that these cuts are vital if the company is to have any chance of growing its top-line figures.

He said that this will be achieved by a number of means, but job reductions will ultimately form part of that overall cost-cutting exercise — although he put no fixed numbers on the numbers of jobs that will go. Eircom has reduced its headcount by 1,500 since March of 2009, exceeding its initial target of 1,200 by March 2011.

In terms of customer numbers, Eircom gained 43,000 broadband subscribers over the 12 months, 17,000 mobile users and lost 70,000 landline customers.

The growth in mobile subscribers was slowed due to Eircom having to change distribution agent after 3G Mobile went into receivership.

Meanwhile, the company is also looking at ways of dealing with its high net debt levels, admitting that failure to do so could result in it breaching its financial covenants within the next year and a half.

“We are actively reviewing our options to address this issue,” Mr Donovan added yesterday.

Those options include upping shareholder equity and re-negotiating with lenders, but Mr Donovan said that while the situation won’t be fixed overnight, it does remain a real priority for management.