Esat's $5 million (€4,720,544) agreement with Global One to act as its exclusive partner in Ireland should add around £3.5 million (€4.4 million) to Esat's revenue in the current year. That's according to Davy Stockbrokers, the company's broker which predicts the deal should add around £5 million in revenue next year, although it will mean an increase in losses before interest, tax and depreciation of up to £1 million.
"Apart from the incremental revenue and customers brought to the group, a linkage with an international partner will give Esat an added boost in its efforts to grow its customer base and fight off new (and larger) competitors such as British Telecom, Cable & Wireless Communications and MCI WorldCom," it says.
And looking to the future, the broker says that given there is no equity holding as part of the deal, it does not reduce the likelihood of Esat being bought out at some stage in the future.
Global One is the international alliance between long distance US carrier Sprint, Deutsche Telecom and France Telecom. In Davy's view the deal is a significant strategic move for Esat because it allows the group to supply its customers with seamless voice, Internet and high end data applications through the Global One network. Global One's annual turnover is £5 million in Ireland and it has around 60 clients, including Dell, Hewlett-Packard and UPS, says Davy.
However, the brokers' note suggests that the fledgling merger between Deutsche Telecom and Telcom Italia could have ramifications for the Global One alliance. "In other words, the industry is changing so rapidly that agreements between operators, be they alliances or planned mergers/acquisitions are quite tenuous."
