eircom mulls stock market listing and mobile market re-entry

21 Jul 2003

Irish fixed line incumbent eircom has said it is contemplating a return to the stock market next year, and considering plans to re-enter the domestic mobile market when a non-compete agreement expires in May. eircom, which was acquired by a consortium led by the entrepreneur Sir Anthony O’Reilly in November 2001 in a deal worth around USD2.74 million, signed the non-compete contract in 2000 when it sold its Eircell mobile unit to Vodafone in an all share deal estimated to be worth EUR4.25 billion. However, it is now mulling the possibility of a return to the sector in what is seen by analysts as an attempt to leverage the face value of any future deal. The domestic wireless sector is dominated by Vodafone which claimed just under 1.73 million subscribers, a market share of 56%, at the end of 2002, ahead of O2 with 1.24 million (40%) and third placed Meteor Mobile on 125,000. Although eircom could look to strike a mobile virtual network operator (MVNO) agreement, or alternatively forge a partnership with either underperforming player Meteor or 3G licensee Hutchison 3G, both options are problematic. Meteor has struggled to wrest even a 5% market share from the two established players, leading some to question how newest entrant Hutchison will manage to break into the Irish mobile market. Hutchison could look to buy Meteor from its US parent Western Wireless, thereby eliminating a competitor and giving it an immediate foothold in the market. Both Hutchison and Meteor have repeatedly denied that a buyout has been discussed. The scenario is, however, not encouraging in supporting eircom’s ambitions to relaunch itself as a mobile operator.

eircom’s backers are believed to be keen to seek a timely flotation of the company considering the recent GBP2 billion listing of Yell and indications that other major European telcos – such as Belgian incumbent Belgacom – are considering turning to the stock market. The Irish telco, whilst not seen as a lucrative earner for potential investors, has the ability to generate strong revenues and could be attractive to would-be investors. But its future income would have to come from a strong portfolio of mobile and broadband data services, as its traditional fixed line telephony sales are falling. Since the fixed line market was deregulated at the end of 1998 eircom has seen its share of the sector fall to around 79%, although it retains a stranglehold on the local loop. By the end of 2002 it had 1.61 million PSTN lines in service, as well as 375,000 ISDN access channels, but the number of customers using carrier pre-selection continues to grow, numbering 176,000 by that date, up from 140,000 in April.

Ireland,

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