Eircom cheered by 3G licence and revenue gains
28-02-2007
by Ciara O'Brien

There was reason to celebrate in Eircom's HQ on Wednesday as the incumbent announced increased revenue, more subscribers, and accepted the final 3G licence.

Revenue for the third quarter, ending 31 December, rose 9 percent year-on-year to EUR490 million. This figure includes Meteor's revenues for the corresponding quarter to December 2005. Meanwhile, fixed line revenue rose 1 percent to EUR409 million, compared with a year earlier.

However, the group's operating profit for the nine months to the end of December 2006 slumped 9 percent to EUR214 million, apparently due to lower property disposal gains.

During the third quarter, Eircom's earnings before taxes and other costs increased 8 percent to EUR154 million, while Meteor saw its earnings before taxes for the quarter reach EUR14 million, in line with expectations.

There was evidence that the incumbent's investments in broadband infrastructure and its Meteor mobile network is paying off, with both sectors experiencing increased subscriber numbers. The company has boosted its investment in these areas by 28 percent of its capital expenditure cash outflow for the nine-month period to date to EUR219 million.

Eircom said it added some 60,000 new broadband customers in the quarter, a rise of 50 percent on the previous quarter. This brings the total number of broadband subscribers to 390,000, and puts Eircom firmly on target to meet its goal of 500,000 broadband subscribers by the end of 2007.

Meteor, meanwhile, gained 69,000 new subscribers during the third quarter, bringing the network's total customer figure to 803,000 by the end of December -- a 28 percent increase in nine months. This figure rose to 819,000 mobile subscribers by 31 January 2007.

Eircom also released its results for the nine months ending 31 December, with revenue of EUR1.46 billion; up about 11 percent over the same period a year earlier. Fixed line revenue rose 3 percent to EUR1.24 billion.

Earnings before interest, taxes and goodwill amortisation (EBITDA) for the nine months to the end of December 2006 surged 10 percent to EUR484 million. Fixed line EBITDA for the period reached EUR446 million, compared to EUR440 million in the same period a year earlier.

"Over the last quarter and during the nine-month period to date, the group continued to deliver solid revenue growth, both in the mobile and fixed line segments," said Rex Comb, chief executive of Eircom.

"This has largely been supported by Meteor's contribution to revenue, EBITDA and subscribers."

The company also announced that it was accepting the offer of the final 3G licence in the Irish market, originally offered to Smart Telecom, provided that certain financing arrangements are in place before 12 March 2007.

ComReg officially made the offer to the incumbent after it withdrew the licence from troubled telecoms firm Smart Telecom, based on issues surrounding a EUR100 million performance bond to be paid to ComReg by Smart. The telco fought the regulator's decision, bringing its case to the High Court in a bid to regain the licence offer. However, the action failed, leaving the way clear for Eircom to enter the 3G market.

Meanwhile, Eircom's parent company, Australian investment house Babcock & Brown, experienced a 78 percent rise in second-half profit, beating analysts' expectations. But predictions of slower earnings growth for 2007 caused its shares to slump. B&B earned AUD243.8 million (EUR146.5 million) in second-half net profits, compared with AUD137 million (EUR82 million) one year ago.