Eircom releases statement on full-year results; Meteor’s earnings down sharply

12 Sep 2011

Irish former monopoly Eircom last Friday published a statement for public release on its latest financial results. In it the operator said: ‘Under the terms of the EUR3.65 billion [USD4.98 billion] Senior Facilities Agreement (SFA), the company today provided its unaudited financial results for the year ending 30 June 2011 to the SFA lenders. Overall EBITDA (before exceptionals) for Q4 is in line with the overall EBITDA reported in Q3 with fixed line EBITDA for Q4 marginally ahead of Q3 and mobile EBITDA for Q4 significantly lower than Q3. Exceptional items primarily comprise a provision of EUR129 million in relation to the estimated costs associated with the previously announced plans for workforce reductions of approximately 1,000 people over the coming twelve to 18 months (of which to date c500 people are confirmed leavers). Cash capital expenditure for the twelve month period ended 30 June 2011 was EUR163 million, in-line with the guidance given during the Q3 results announcement. The cash balance as at 30 June 2011 was EUR459 million. In addition, in accordance with eEircom’s normal year-end procedures and the relevant accounting standards, eircom has undertaken a review of the carrying value of the goodwill and other non-current assets recognised in its consolidated balance sheet. This has resulted in an impairment of the goodwill balance of approximately EUR1.3 billion. This impairment reflects an increase in the discount rates used in the carrying value assessment, together with the deterioration in the Irish economic environment and outlook for the business, since the assets were last assessed in June 2010. It should be noted that this is a non-cash accounting adjustment’. The statement went on to say that it is the operator’s intention to release the audited report and accounts in accordance with its reporting obligations under the terms of the Senior Notes and Senior PIK Notes.

Meanwhile, the Irish Independent newspaper writes that earnings at Eircom’s mobile business, including subsidiary Meteor, were ‘significantly’ down in the fourth-quarter ended 30 June 2011, compared with the previous three months. The paper reports that Eircom has also written off EUR1.3 billion of the value of the group due to the poor outlook for the business and the wider Irish economy.

It is understood that Eircom’s public disclorure comes as its lenders consider a plan to strike a deal that will help the troubled PTO avoid breaching debt covenants in return for paying senior lenders a one-off fee of around EUR13.5 billion. Unnamed sources with knowledge of the negotiations predict that the majority of Eircom’s approximately 200 senior lenders – holding EUR2.75 billion of its debt – will agree a deal by next Tuesday. A two-thirds majority is required for the covenant waiver to be adopted. Following this, Eircom will have three months or so to finalise its restructuring proposals, which could see it writing off as much as EUR1 billion of debt in return for an injection of EUR300 million from investors, including shareholders Singapore Technologies Telemedia (STT) and the Employee Share Ownership Trust (ESOT).

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