Eircom rings up loss of €104m after 2001 profit of €66m

EIRCOM’S fortunes have dipped sharply since it was bought by Dr Tony O’Reilly and US private investors in November 2001.

Figures released yesterday show the fixed-line operator made a loss before tax of €104 million in the 12 months to March 31 2002. That compares with profits of €66m in the previous financial year.

Eircom chief executive Dr Philip Nolan last night called for an end to regulation. Figures released by the group show the company is continuing to lose ground to mobile operators. Eircom’s share of voice market has fallen to 38% against 52% for the mobile operators with the rest controlled by others in the market.

“Regulation is killing the fixed line business while the mobile market which is by far the biggest sector is not unregulated,” said Dr Nolan. The group confirmed that write downs of network assets, the sale of Eircell to Vodafone, and a fall in turnover in some operations left the country’s dominant fixed telephone line provider with substantial losses at the year end.

Eircom was taken over by the Valentia consortium at a cost of 3m towards in November 2001 with just three months to go in the financial year.

The pre-tax loss also includes the cost of €59m for the demerger of the mobile phone business. Below the line the group is left with a massive €269m loss that includes the payment of €176m in a dividend which was required as part of the Eircell deal. To buy the business at a cost of €3bn the Valentia consortium borrowed €2.4bn and paid €48m in interest charges to fund that debt, which the consortium is carrying on its own books.

Because of the mobile deal with Vodafone for Eircell, the turnover for the year is down dramatically.

It shows sales year-on-year down form €2.158bn to €1.785bn. Dr Nolan said sales were flat year-on-year due to competition from fixed and mobile operations.

The regulation price cap was also hitting the company hard, while the battle on pay costs was being hard won. It showed non-pay costs down by 12% against 3% in the case of pay. The national pay deal was making it difficult for the company in that regard despite a 1,200 or 10% cut in the workforce to 9,050 by the year end.

Returning to the cap on charges, Dr Nolan said the ruling by the regulator keeping increases at CPI less 8% is making it very difficult for the to do business.

Investment of €200m was made by the company this year, but unless it makes realistic profits, it will find it difficult to ensure a proper infrastructure.

Regulator Etain Doyle is due to announce a new pricing structure in January, but even if she allows the company to increase charges by the rate of inflation, Dr Nolan said it will not be enough.

“Given the level of competition in the market the sector does not need regulation and it should be scrapped,” he said.

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