It is hard to see how the sale of Eircom for the fourth time in six years can be in the public interest. Central to the takeover deal proposed by Babcock & Brown and the Eircom Employee Share Ownership Trust is the splitting of Eircom into two units. One will operate the network that remains the core of the Republic's telecommunications infrastructure. The other will comprise the retail or customer facing part of Eircom, including its recently acquired mobile arm, Meteor.
Babcock & Brown argue that their proposal will be good for the wider economy as it will create an environment where all telecoms companies have access to the core network on an equal basis. This may be true, but Babcock & Brown is a bank and not a charitable foundation. The other, and presumably the main reason, for breaking up Eircom is that by dint of some clever financial footwork it will allow this already heavily indebted entity take on some more borrowings.
These borrowings it should be remembered will have to be repaid out of the company's profits, which in effect means from customers via their bills. Also worth noting is that this additional borrowing will not be used for investment in Eircom. It will be used to repay the consortium of international banks that will lend Babcock & Brown most of the €2.36 billion that it plans to pay for Eircom.
When you add in the huge difficulties involved in separating a business that has been one unit since its inception into two stand-alone entities, the Babcock & Brown proposal looks both risky and expensive from the perspective of its customers and other stakeholders.
The decision of the Eircom Esot to throw its lot in with Babcock & Brown seems precipitous, but not out of character. Established ahead of the company's stock market debut in 1999, the Esot was intended as a vehicle through which the workers in the company could share the fruits of success and have a say in its governance. It has become a self-sustaining body that has chosen to focus on the narrowest of interpretations of its mandate: namely the maximising of the return to its 8,000 beneficiaries, the majority of whom no longer work for Eircom.
The Esot has been a pivotal player in both the 2002 purchase of the company by venture capitalists and its return to the market in 2004. On both occasions the financial returns to its members were significantly enhanced, but on neither occasion could the Esot be said to have acted in the wider interest of the Eircom stakeholders. This time is unlikely to be any different.
Babcock & Brown and the Esot have a combined stake of 51 per cent, meaning that their bid is almost certain to succeed. Regrettably the Government seems both unable and uninterested in intervening in a transaction that is in all probability contrary to the interest of most citizens and risks further undermining our waning competitiveness in the key area of telecommunications