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Eircom profits down 30 percent
04-12-2000
by Aoidin Scully
Eircom has reported a 30 percent drop in pre-tax profit to EUR131 million, and has said sale talks with Vodafone for Eircell should be completed in two weeks.
The steep decline in pre-tax profits compares to EUR186 million for the same period last year. Interim results for the period 1 April to 30 September also revealed that earnings per share are down 21 percent to 5.1 cents, from 6.5 cents in 1999, and EBITDA down 12.5 percent to EUR337 million.
Eircom said that negotiations with Vodafone over the sale of its mobile business, Eircell, are continuing, and that both companies hope negotiations would be concluded within the next two weeks. A number of issues remain to be finalised, it said, including clarification on the regulatory framework for third generation mobile licences in Ireland. A value of EUR5.1bn has been placed on Eircell.
The company's turnover is up 14 percent to EUR1.062 billion, thanks to growth in both fixed line and mobile revenues, while the cost of sales is up 66 percent to EUR277 million (EUR167 million last year), due mainly to costs associated with the significant increase in mobile customers and increased payments to other telecommunications operators.
Operating costs are up 24 percent to EUR448 million, which it attributes to 'continued investment in customer contact activity in an increasingly competitive market and additional costs associated with the rapid growth in mobile and new business activity'.
"Our interim results highlight continued strong revenue growth in our business," claimed Eircom's chairman, Ray MacSharry, in a statement. "The business continues to perform well in an increasingly competitive marketplace and rapidly changing industry environment." He added that the organisation is "committed to improving the cost effectiveness of the business and to investing to reposition and grow the business for the long-term."
Eircom's mobile customer base is up 59 percent to 1,236,475 and it estimates its market share as 60 percent. Fixed line retail call traffic is up 5 percent to 5.1 billion minutes, and total fixed access channels, including PSTN, ISDN and leased lines, is up 6.2 percent on last year to 1.8 million. The ISP customer base grew by over 17,000 in the review period bringing the total base to 260,000, an increase of 120 percent on last year.
Media reports suggest that serious discussions are expected to begin this week between Eircom and eIsland, the Denis O'Brien-backed consortium which has made a EUR2.25 billion bid for Eircom's fixed line business.
A statement outlining the 3G regulatory framework is due to be published by the Office of the Director of Telecommunications Regulation shortly.
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