Ireland: Eircom To Sell Mobile Subsidiary But Still Expects Job Losses

by Amanda Banks, Tax-news.com, London

12 April 2001

Ireland's former state-owned telecommunications company, Eircom, has announced that it will cut back jobs amid plans to sell its mobile subsidiary, Eircell, to Vodafone. Within two years Eircom says it predicts the loss of around 3,500 jobs to leave a workforce of 9,000. Last month the company announced that 700 Eircom employees had been made redundant.

Eircom has been on a gradual spiral for some time now and would welcome the cash from the Eircell sale - which is set to be approved by shareholders on 17 April. The company says it expects profits before interest, tax, depreciation and amortisation to fall from Euro 746 million to Euro 640 million and blames the increasing cost of sales compounded with the increase in fixed-to-mobile call charges. It also says that competition from other telecommunication companies could damage its revenue growth even after the sale of Eircell.

Eircom's decision to sell Eircell has attracted a surprised response from Barry Maloney, former head of Esat Digifone, who told the Irish media that it just didn't make sense. He pointed out that Eircom did have any debts (thanks to its decision to withdraw its application for a UK 3G licence - leaving it to the competition) and is still generating a respectable income when competitors such as BT and Worldcom were also experiencing narrowing profit margins. Mr Maloney advised Eircom to hold tight for 18 months saying, 'I just don't understand why Eircom doesn't just take costs out and sell nothing to anybody.'

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