Eircom lessons warn against privatisation

Yesterday’s decision by the High Court to grant Eircom an interim examinership marks another sorry milestone in the long — but illustrative — decline of the company, one that provides services vital to our society and economic recovery.

It also sounds loud warning bells about what can happen — or what does not happen — when a privatisation goes wrong.

The telecommunications market is far more competitive and diverse than it was when the company was privatised in 1999. It is evolving more quickly and can no longer be defined by national boundaries. It is truly international, and international criteria and standards apply in all markets. In this context, the Eircom privatisation has been disastrous for Ireland and for the majority of those who invested in the company.

Eircom, pillaged by one corporate owner after another, has not had the resources to develop the services, especially broadband, it or its customers would like. We lag too far behind on speed and cost issues in international broadband league tables. There is no point in pretending this is not an impediment to economic recovery.

Apart from the way in which the development of telecommunications infrastructure has been stymied by the debacle — multiple owners, soaring debt and services that do not match those in our competitor countries — the episode is as good a parable as any for our times.

It is chastening — painful for those who took up the maximum share allocation on floatation — to remember the greed dressed up as entrepreneurship that made the flotation such a national event. There was almost a carnival air as investors thought, as they were encouraged to think, that they were on to a sure thing. Politically driven and supported by a marketing campaign that turned a blind eye to the possibility of losses, nearly anyone who could do so bought shares. Nearly all, like those who bought bank shares in the last decade, lived to regret that decision. The venture was a good signpost to what was to come if only we had to wit or honesty to see it.

On a different level, the saga is particularly pertinent. Though proposals for selling off national assets seem to be less radical than those imagined at the early stages of our penury the Eircom story carries a stark lesson.

Once an enterprise is privatised differently, conflicting objectives are prioritised. Profit replaces service as the mission statement and there are inevitable casualties — like much of our drip-drip, freeze-frame broadband.

The Eircom story should convince us to resist privatising state companies, especially utilities. The best way to do this is to make them as efficient — as profitable — as they might be on behalf of all of us. Special interests would have to be confronted but that is far better than selling them off and creating another Eircom disaster.

Neo-conservative, Thatcherite philosophies have failed on so many fronts that we would be worse than foolish to pursue one of the creed’s cornerstones — selling off essential state service companies to those with no qualification other than access to a great deal of capital — and the intention of to maximising profits whatever the consequences.