INTERNET
'Good time' for Eircell buy-out
09-10-2000
by Aoidin Scully
Increased competition means the time is now right for Irish telcos to sell off cellular assets and realise value, according to industry analysts.
Speaking in the wake of confirmation by Eircom this morning that it is in talks to sell off its mobile subsidiary, Eircell, Jemma Houlihan of ABN Amro, noted "Ireland will have double the number of telecom players this time next year, so the competitive landscape is going to intensify and it will become increasingly difficult for Eircom to maintain their 60 per cent market share." Another telecoms operator is expected to enter the market at Christmas, as well as an additional mobile operator by Easter.
Eircom's share price reacted well to speculation in yesterday's Sunday Times that Vodafone will buy Eircell for IEP 3.2 billion -- more than 70 percent of Eircom's total worth -- by rising 32 cents to EUR2.78. "Shareholders are hoping that someone else will emerge as being interested in the company, which would give rise to a bidding situation to push the price up," commented Houlihan. "It's early days yet, though, and no organisation is going to reveal its hand so early. In any case, the price that's been talked about is fairly generous -- it's in-line with what other cellular operators are trading on."
The Eircom speculation is the latest in a series of what observers are calling "bed hops" between European telecom companies. Since British Telecom bought Esat Digifone, Eircell's main rival, France Telecom has been reported to be in talks with Eircom, which would have linked Eircell up with Orange. France Telecom bought Orange for STG25.1bn in May this year.
Meanwhile, British Telecom paid STG4.09 billion to acquire German phone company Viag Interkom, Spain's Telefonica is preparing to partially spin off its cellular division, Telefonica Moviles, which is internally valued at EUR66bn or some two third's of the parent group's market capitalization, and Enel, the Italian utility, is understood to have agreed in principle the purchase of Infostrada, the telecommunications group being sold by Vodafone.
"It would be good for both shareholder and subscriber if Vodafone bought Eircell," added Houlihan. "For the subscriber it would mean access to Vodafone's international mobile network, and call prices falling because of Vodafone's strong buying power."
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