Australian investment fund Babcock & Brown is likely to seek as many as 400 redundancies from the fixed line division of Eircom in the next year as the group consolidates its grip on the former State telecoms firm.
With an application for a price increase on the cards, the likely reduction of staff from a total of 7,025 in the fixed line unit comes amid a shift in growth momentum to Eircom's mobile and broadband offerings.
Mobile unit Meteor saw its subscriber base rise to 849,000 this month from 625,000 in March 2006, while the number of broadband customers now stands at 440,000, up from 230,000 in March 2006.
Eircom yesterday reported a 16 per cent rise in revenues to €1.96 billion in the 12 months to March and a 3 per cent rise in operating profits to €240 million.
The group made operating profits of €60 million in three months to March, reversing a €2 million deficit in the same period last year.
Chief executive Rex Comb said the group had now resolved customer service problems that led it to delay an application for a price increase earlier this year.
Citing cost inflation and wage inflation under national agreements, Mr Comb indicated that Eircom would soon look to increase its tariffs.
Mr Comb said he was discussing with Eircom's board the extent of job cuts required in the fixed line division. While the number was not yet finalised, he said it was "in the order of at least 300-400 over the next year".
The group has taken advantage of a softening in international debt markets to reprice its debt, a move that will reduce its annual interest bill by €16 million to €240-€245 million from mid-June.
He accepted that finance costs will increase if the European Central Bank increases interest rates again, but said that more than half of Eircom's interest bill was hedged for three or five years.
In the fixed line unit, earnings before interest, tax, depreciation and amortisation (Ebitda) and before restructuring and other exceptional costs rose 7 per cent to €641 million in the year to March. Comparable figures for the mobile unit show a rise to €54 million from €4 million.
"I'm happy with the way the business is doing. We're very focused on customer service on one hand, making sure that we maintain our Ebitda on the fixed line business, number two, and then thirdly transforming the network for the future."
Eircom's capital expenditure was €294 million on network capacity and the roll-out of broadband networks. In addition, Mr Comb welcomed progress on the scheme to publicly subsidise broadband in "uneconomic" areas.
"As of last week, customers can can now move freely and seamlessly between various broadband providers including moving from Eircom's network," the company said. After resisting intra-operator migrations as a "free lunch", the company will facilitate such a service from September.
