More job cuts ‘inevitable’ at Eircom

EIRCOM has said further job losses at the company will be an “inevitable” consequence of meeting its €92 million cost-cutting target by 2013.

Management is due to open talks with unions about how best to reduce its annual pay cost — through a variety of measures, including new exit programmes and the modernisation of work practices — but is hopeful of retaining its culture of voluntary redundancies. Over the last two years, Eircom has reduced its head count by 1,800, but it declined to say how many jobs it was looking to cut in the next round of losses.

“This is less to do with the number of jobs that could be reduced and more to do with meeting the €90m cost savings,” Eircom chief executive Paul Donovan said, adding that when revenues and customer numbers are falling, Eircom needs fewer people.

The discussions with unions take place this week and management is hopeful its offers could be passed by as early as next week.

The company also said, yesterday, that, while it is still in full compliance with all of its financial covenants, there is a “significant risk” it will breach these covenants with its lenders over the course of the next three to six months, “depending on trading conditions”. Discussions with lenders begin this month, but Mr Donovan said the company’s strong level of cash generation — it has €400m of cash on its balance sheet — means it is less likely to fail, if it does breach covenants, than other firms in the same situation.

Eircom also published financial results for its second quarter and first half (the three and six months to the end of December) yesterday. Group revenue was down by 6% to €438m for the quarter and fell by 5.7% — year-on-year — in the half year to €880m.

However, the company called the results “solid”, given the sector-wide trading conditions, as evidenced by a return to pre-tax profitability in the half year — a profit of €32m, as opposed to a corresponding loss of €13m — and only a 1.5% year-on-year fall in EBITDA (management’s preferred growth metric) to €322m.

Eircom’s average revenue per user in its mobile division was down, but not by as much as rivals Vodafone and O2. The company noted that it lost around 20,000 mobile customers last year — to emigration — representing around 2% of that division’s subscriber base.