Sir, - The mini-prospectus issued by AIB Capital Markets Plc and Merrill Lynch International offering shares in Telecom Eireann Plc leaves too many important questions unanswered.
Firstly, no balance sheets were presented. Without a balance sheet it is impossible to make a sensible interpretation of financial stability. This should be relevant to any decision to accept or reject the offer.
Secondly, in the consolidated trading results for the year ended April 1st, 1999, an exceptional item (loss) of £136.9 million is reported. I can find no explanation of the reason for this. Without this information I find it impossible to make a sensible estimate of profits attributable to shareholders for the current financial year. Such an estimate is a key issue in assessing the attractiveness of the offer.
Thirdly, the prospectus does not quote the earnings per share (EPS) in the financial information quoted on page 28. The absence of this information, which is mandatory in published accounts, is incredible. I calculated the EPS for the year ended April 1st, 1999 as 2.79p. To get this I divided the net profit attributable to group shareholders of £61.6 million by the 2,207,826,690 shares that will be in issue after the offers. The EPS provides the basis for calculating the historic price earnings ratio (PE). If the EPS is divided into the maximum price in the indicative offer price range. I obtain a PE of 117.2 times. If divided into the minimum price in the indicative offer price range I obtain a PE of 94.6 times.
I am astounded that I have found little debate on the historic PE ratio in the media. It should be fully debated and compared with those of other Telecom organisations quoted internationally. Without such qualitative debate potential investors will be left to blindly follow or ignore market and media euphoria rather than the proper consideration of the fundamentals that have been totally ignored in the international share price mania of recent years. - Yours, etc.,
Ray Fitzgerald Fca, Carrickbrennan Lawn, Monkstown, Co Dublin.