As expected, the long-running saga of the sale of Ireland’s smallest cellco, Meteor Mobile, has finally drawn to a close, with fixed line incumbent eircom agreeing to pay EUR420 million (USD505 million) for the company. The deal represents a major gamble for eircom as it prepares to re-enter the wireless market just five years after quitting via the sale of its own mobile subsidiary eircell to Vodafone in 2001. eircom plans to fund the purchase with a heavily discounted two-for-one rights issue, despite the fact that its borrowings are already among the highest of Europe’s incumbents. Yesterday shares in the telco dropped 16 cents to EUR1.73.
A deal between eircom and Meteor’s US parent Western Wireless has been on the cards since the telco’s last bidding rival Smart Telecom withdrew from the race last week. Smart and its UK-based business partner Virgin Mobile said they had decided to pull out of the bidding because they felt Meteor’s parent Western Wireless International (WII) valued the company too highly, whilst failing to provide sufficient information to justify the price. Smart’s decision came just one week after a consortium led by Irish businessman Denis O’Brien retracted its bid.
Meteor launched the country’s third GSM mobile phone network in February 2001. It remains the country’s smallest network operator by some margin, but is growing steadily. In the first quarter of 2005 it signed up 37,000 new users, more than double the number added by rival O2 in the period. At the end of March, Meteor had 376,600 subscribers and a market share of around 10%. Despite the fact that it is rapidly approaching saturation levels, the Irish mobile market remains a potentially lucrative sector for investors. According to regulator ComReg, ARPU in Ireland in 2004 stood at EUR48 a month, compared to a European average of EUR31, and operators’ profit margins are far higher than elsewhere on the continent. However, Meteor’s own ARPU was just EUR27 last year and it has some work to do to make up ground on Vodafone and O2.