Eircom hit by customer cutbacks

STRUGGLING consumers are cancelling Eircom subscriptions in a bid to cut costs and are becoming increasingly cautious.

This is according to Eircom chief executive, Paul Donovan, who said the difficult economic environment shows no sign of easing.

Meteor, which has a young customer base, said it is losing customers due to emigration and non-national workers returning home.

Mr Donovan said consumers having much less money to spend has led to some cancelled subscriptions and smaller bills. People are cutting back, especially on broadband, with some cancelling home broadband and using only mobile.

Eircom, which is Ireland’s largest phone operator and is majority-owned by Singapore Technologies Telemedia (STT), said it is “very optimistic” it can resolve its debt situation this year. However, it warned of a likely breach in financial covenants in the next three months.

Eircom warned in March of a significant risk of a covenant breach within three to six months and said it would talk to shareholders about possibly injecting new equity.

Interim financial officer, Mark Wilson, said the process to repair its covenants will be ‘quick’ and eircom may present proposals to lenders by the summer.

As at March 31, net debt stood at €3.75 billion, with no further repayments scheduled before June.

Mr Donovan said eircom is holding preliminary talks with lenders about its covenants. In the quarter ended March 31 group revenues at eircom fell 11% to €407 million. Earnings before interest and tax fell by 6% to €160m.

The company, which plans to cut 1,000 jobs over the next two years, said competition continues to increase, especially in the broadband market.

In what might prove a boost to revenues, however, it is launching the iPhone 4 in Ireland in the coming weeks through its Meteor and eMobile brands.

Operational costs fell by 13% in the quarter and agreement was reached with the Trade Union Alliance (TUA) in March to achieve a cost savings target of €90m by 2013. The agreement was endorsed in April by a ballot of TUA members. The first phase, which includes a 10% reduction in working hours in exchange for 10% reduced pay, will be implemented from Monday.