EIRCOM AND its unions reached agreement yesterday on a major restructuring plan that will lead to 1,200 job cuts and voluntary pay reductions of between 5 per cent and 10 per cent.
In addition, no performance-related bonuses will be paid before mid-2011, and subsistence and mileage expenses have been cut by 25 per cent, along with a raft of other allowances.
These moves are aimed at helping Eircom achieve annual savings of €130 million by the end of June 2011 as it struggles to service a near €4 billion debt and to cope with an estimated decline in its business of about 9 per cent.
Eircom has also signalled it wants to reach agreement by the end of July on measures to tackle its €430 million pension deficit.
Cathal Magee, Eircom’s acting chief executive, welcomed the agreement with unions.
“We are pleased to have gotten this far,” he said. “We concluded this over a period of six to seven weeks, which was very important.”
Steve Fitzpatrick, head of the Communications Workers Union, spent much of yesterday briefing Eircom workers on the restructuring plan.
He said staff were “devastated” by the cutbacks, but “they also realise that they cannot escape the vagaries of the world”.
“The key thing for us is that there will be no compulsory redundancies,” Mr Fitzpatrick added.
About half of the 1,200 job cuts will involve contract staff, with the balance full-time employees. The reduction in headcount is to be achieved by the end of June 2011.
This deal comes at a time when Eircom’s parent group – a listed fund in Sydney now called Eircom Holdings – is the subject of a bid from a group of former Babcock Brown executives led by Rob Topfer.
Eircom’s board of directors has opposed this offer and indicated that they will seek to appoint corporate advisers shortly to assist them in evaluating other strategic options for the Irish business.
The employee Esot, which owns 34 per cent of Eircom, will also be a key player in determining the Irish company’s future.
Mr Fitzpatrick was blunt in his assessment of what needs to happen next.
“I think we need a new owner, preferably from the industry,” he said. “We need the new owner and the Esot to put money on the table to invest in a new fibre network.”
He said a “lighter-touch” regulatory framework was also required “to allow the company to survive”.
He said investment in Eircom’s network would be beneficial to competition in the marketplace.
Eircom said the cuts were being made against the background of an “extremely challenging” environment that had led to a recent loss of customers, traffic volumes and mobile revenues.
The new subsistence rates will come into effect from March 5th and will last for at least two years.
Eircom is also seeking to suspend its “time-in-lieu” arrangements and end “cost of substitution” agreements.
No bonuses will be paid for the next two years, while other performance-related commissions – typically earned by sales staff – are “under review”.
Eircom said its net debt was “too high”, with “excessive annual interest costs”.
It said the pension deficit would add “further significant balance sheet strain” if it were not tackled.
Eircom controls about 68 per cent of the fixed-line market in Ireland. It is also the country’s biggest broadband provider, while its Meteor mobile phone arm is the third-largest operator here.
Eircom said it would review its cost base every six months to monitor implementation of the various cost-saving measures and to fast-track any additional measures deemed necessary.
