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Eircom announced on Monday that it is recommending the sale of Eircell to Vodafone while confirming that jobs in its multimedia operations will go.
While the company expects turnover for the year ended 31 March, 2001 to be on target, it warns that it is being forced to provide services to competitors at a loss.
In a major statement which set out details of the proposed Eircell sale and its restructuring programme, Eircom said it was scaling back on its international and multimedia activities because of the "changed telecommunications environment."
The Eircom statement comes after media reports last week which set out much of what the company had planned, including the closure of the multimedia business and significant redundancies.
Eircom confirmed there would be major restructuring of the company and said that changes to its multimedia activities will results in around 200 jobs losses from the present level of 530.
It said was "exiting" its Internet software and content development investments that will see Eircom.net and Indigo being merged under Eircom.net. The company said the general meeting of its shareholders to approve the sale of Eircell will be in The Point Theatre on Friday, 11 May.
Shareholders will be sent details of the meeting and the Vodafone offer shortly. Eircom shareholders will be allotted one share in Eircell 2000 (as the new entity is called) for each share they hold in Eircom. They will continue to hold their Eircom shares and under the terms of the Vodafone offer, Eircell 2000 shareholders will receive 0.9479 Vodafone shares for every two Eircell shares held.
Eircom said it expects group turnovers for the year ended 31 March to be EUR 2,100 million (EUR 1,700 milllion, excluding Eircell) and EBITDA will be EUR 640 million (EUR 445 million excluding Eircell).
The company maintained that turnover and EBITDA are in line with targets. It expects capital expenditure to be lower than planned.
It says that the regulatory environment in which Eircom operates has become extremely challenging in recent years.
It adds, "The company has made significant investments in building and upgrading its infrastructure and is now obliged to provide interconnection for competitors at rates that do not cover Eircom's full costs." Against this backdrop Eircom says it intends implementing a more targeted investment programme with greater emphasis on areas where it can maximise the return on capital.
It believes the current regulatory regime is resulting in declining investment in telecommunications infrastructure in Ireland. It wants talks with the Government and the ODTR on this.
The main focus of its new strategy will be in relations to capital expenditure, cost reductions, multimedia activities and international developments.
A key part of this will see the company focussing on profitable Internet services and ending its Internet software and content development investments.
Its two ISPs, Eircom.net and Indigo, are being merged under Eircom.net and will be more closely aligned with the core fixed business. These changes will results in a reduction of approximately 200 employees from a current level of 530.
The restructuring programme announced last year for the fixed line business will continue. Other restructuring areas will include, a scale-back of Eircom's operation in the UK; Northern Ireland business will be more closely integrated to provide an all-Ireland focus; a scaling back of DSL investment and a deferral of DSL service.
NB: Due to an editing error, the number of Eircom multimedia job losses was incorrectly listed in the ENN Digest. The correct figure is 200 job losses, not 330.
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