Eircom revenues fall 6 per cent

Telecoms group Eircom said it may breach its financial covenants in the coming months and said it would start talks with its lenders by April.

The group said although it was fully compliant with its financial covenants at the end of December, there was "significant risk" it would breach them within three to six months, despending on trading conditions. The group said it plans to continue talks with shareholders over a possible injection of new equity.

Eircom, which is majority-owned by Singapore Technologies Telemedia, is restructuring to manage a legacy fixed-line business in long-term decline.

In November, S&P downgraded Eircom to CCC+ amid fears it would breach covenants

Net debt was €3.75 billion in December, some 5.6 times its earnings before interest, tax, depreciation and amortisation (EBITDA).

Revenue fell 6 per cent in the second quarter from the year before to €438 million, as the number of residential fixed lines continued to fall and average revenue for mobile customers declined. The group said it reduced operational costs by 7 per cent.

The company today announced it would upgrade its wireless data services to more than 4,000 hotspots around Ireland by 2013.

Chief executive Paul Donovan said the group was still facing challenging trading conditions, blaming the tough economic environment and changes to consumers' disposable incomes.

"Revenue losses have been partially offset by operational cost reductions, but it is vital that Eircom remains single-mindedly focused on its three year transformation programme to reshape its cost base, to modernise and to generate new streams of growth," he said.

"Today's announcements underline that we are taking important steps towards securing the future of the group and offering greater value to our customers with innovative products. However, we still face enormous challenges if we are to be competitive in the long term."

Meanwhile, Eircom is hoping to conclude an agreement with unions later this week on a plan unveiled in August to cut €90 million in costs. It earlier announced 1,500 job cuts, leaving it with about 6,300 staff.

A deal with unions has allowed the group to eliminate its pension deficit, the company said. The pension scheme had a surplus of €105 million on December 31st.

Additional reporting: Reuters