ANALYSIS:THE DETAILS of the offer made by Singapore Technologies Telemedia (STT) for Eircom, which were revealed yesterday, leave many questions unanswered.
There was no detail of how much the Singapore-based telecoms group plans to invest in Eircom’s network, which, if the unions are to be believed, has been chronically underfunded in recent years as the company’s Australia-based private equity owners, Babcock Brown, tried to minimise capital expenditure.
The bill will probably be €1 billion-plus, over a long number of years, as Eircom moves to a fibre-optic network that will enable so-called “next-generation” technologies.
There was also no mention of how STT plans to tackle Eircom’s €3.87 billion net debt.
Eircom is the most indebted telco in the industrialised world and, just last week, its new chief executive, Paul Donovan, said its effect on the company was like wearing a suit that was one size too small.
It is interesting that STT did not make a favourable agreement on the debt issue, with Eircom’s banks and bondholders a stipulation of the deal.
The Singapore group seems to be concentrating on getting this rather convoluted transaction over the line – probably in late December or early January – before tackling those issues.
People close to the deal say STT carried out extensive due diligence on Eircom.
We must believe therefore that it has done its homework and is happy that it can make a turn here in the long run.
Given the parlous state of the Irish economy and the increasing competitive pressures being faced by Eircom, STT will, indeed, have to take a long-term horizon.
It was the only industry player to bid for Eircom.
ComReg chairman John Doherty, who met with STT executives “some time ago”, spoke of a 15-20-year horizon when welcoming the deal yesterday.
He also seemed to indicate that STT would be more responsive to the need for “reasonable” competition in this marketplace.
Ireland needs a top-class telecoms infrastructure that is open to all at an economic price if the so-called “smart” economy is to become a reality and help underpin an economic recovery.
It won’t be easy.
There are many vested interests in Eircom who, in spite of their rhetoric, would be happy to maintain the status quo in the fixed-line market.
We can only hope that STT will deliver.
