Eircom issues trading update; reports ‘sharp decline’ in EBITDA in 2H11

21 Feb 2012

Ireland’s troubled fixed line and mobile operator Eircom yesterday published an update on its financial and business plan to June 2017 to its lenders along with estimated results for the month of December 2011. In a statement the firm said: ‘As expected, the estimated consolidated EBITDA for the six months through December 2011 shows a significant reduction in performance compared to the corresponding period in 2010. The results are also behind the results budgeted for the six months through December 2011 and the ability of cost control to compensate for declining revenue is diminishing.’

The telco stopped short of publishing the actual rate of the decline, or indeed the actual amount of EBITDA generated in what was the first six months of its current financial year. However, last year the carrier did issue a business forecast in which it estimated EBITDA of EUR550 million (USD723.7 million) in the year to 30 June 2012, down from EUR699 million in FY2010/11. Industry watchers say yesterday’s statement indicates that Eircom now expects the EBITDA figure for this year to be even lower.

The operator’s trading update was provided to lenders as part of a provision in their covenant waiver, and went on to say that the firm ‘has revised downward its forward forecasts through June 2017 to reflect the changing environment and business prospects.’ The anticipated decline in earnings is centred on the former monopoly’s consumer and SME business segments where it is struggling to retain fixed line and mobile customers, and where those that remain are spending less. On a positive note, Eircom wholesale continues to perform in line with, or even slightly ahead of expectations. The operator’s revised management plan also calls for a faster pace of fibre-optic rollout, even as it looks to reduce overall CAPEX. ‘The first phase of fibre rollout commenced on schedule last month. It is expected to deliver fibre connections to 100,000 premises by the end of Summer 2012. In addition, the full rollout has been accelerated to reach one million homes in three years. The company will also continue its investment in both mobile networks and its customer acquisition programmes.’

Finally, Eircom says it continues to ‘consider and discuss’ proposals tabled by its first lien and second lien lenders, which are aimed at restructuring its EUR3.65 billion of net debts. ‘Morgan Stanley & Co International has been appointed as advisor to the company in respect of the sales process. Receipt of non-binding expressions of interest from interested parties is due in mid-March 2012.’

Ireland, eir