STT bid for Eircom

Donal Palcic06/08/2009

Donal Palcic: The fifth change of ownership of Eircom now appears imminent with Singapore Technologies Telemedia (STT) very likely to make a deal to acquire the company in the coming days. While STT's latest offer price is not known, it is unlikely to be significantly higher than its original bid of just under €110 million given the scale of Eircom's debt that it would assume.

The STT bid was backed by Eircom's ESOT who favoured an industry player over other private equity investor bids. The hope is that an industry player will make a long-term commitment to the company and invest in Eircom's ageing network.

Since STT's bid for Eircom now appears inevitable, and a Government deal to acquire Eircom's network infrastructure which I argued for in a previous post is now wishful thinking, what will now happen to one of our country's most strategic assets is very much up in the air.

While the hope is that STT will make the required investment in Eircom's network infrastructure, STT is a commercial operation that will demand a return on its investment. It is also taking on an enormous amount of debt. It is therefore hard to see STT investing on the scale (and at the speed) required.

The Government still has an important role to play in the development of our national telecoms network assets. It needs to maximise the use of its current fragmented portfolio of assets by amalgamating their ownership/management and providing 'one-stop-shop' access to these assets on an open wholesale basis. Creating a State-owned telecoms network utility to manage these assets would seem like the best option to achieve this. The ownership of any newly built infrastructure (ducting laid down as part of road construction and other civil engineering projects) should also be transferred to this new network utility company. In addition, the company could itself invest in infrastructure in areas where it deemed it necessary, removing the need for the Government to foot the bill for projects such as the MANs.

Sadly, I fear that the Government will keep following its 'do minimum' and 'let's wait and see what happens' approach, Eircom's new owners are unlikely to invest heavily in its network, and Ireland's telecoms infrastructure and broadband services will continue to fall further behind her European peers.

Posted in: InvestmentInvestmentInvestment

Tagged with: telecomsEircominfrastructure

Dr Donal Palcic

Donal Palcic

Donal Palcic is a lecturer in economics and Assistant Dean International at the Kemmy Business School, University of Limerick. His primary area of research is in public sector economics with a particular focus on infrastructure policy, public enterprises, privatisation and public-private partnerships. Donal has co-authored Privatisation in Ireland: Lessons from a European Economy (2011) and has also published a number of refereed journal articles and book chapters on the same topic. He is a member of the Privatisation and Public Private Partnerships (P4) research group based in UL. Donal has also discussed privatisation-related issues both in the press and on national radio on various occasions (see P4 media page for details). In 2016, Donal spent five months as a Visiting Research Fellow at the Cornell Program for Infrastructure Policy in the Department of Policy Analysis & Management, College of Human Ecology, Cornell University (USA).



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