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Vodafone buys Eircell for IEP3.3 billion
Friday, May 11 2001
by Matthew Clark


In what was described as the largest commercial deal in Irish corporate history,
mobile giant Vodafone acquired Eircell on Friday.

The highly publicised transaction has been in the works for months and the
acquisition was passed by over 99 percent of Eircom shareholders. The details of
the deal saw Eircom shareholders receive one Vodafone share for every two shares
in Eircom. The total value of the deal is estimated to be around IEP3.3 billion
based on Vodafone share values at Thursday's market close. 

 

The actual vote count for the de-merger was 1,530,454,456 votes in favour versus
7,137,399 votes against, representing 99.53 percent of the votes in favour. In
addition over 80 percent of the votes in favour were from retail shareholders
suggesting that the votes against came primarily from corporate shareholders.



Additionally, Eircell employees voted overwhelmingly to stay with the company
rather than be transferred to Eircom. More than 99 percent of Eircell employees
will become Vodafone employees in a vote that saw only 27 of some 1350 employees
remaining with Eircom.



In an interview with Online.ie on Friday, Stephen Brewer, chief executive officer
at Eircell said his six years at the helm of Eircell had provoked cultural
differences at the highest levels. He also said in the coming years he expected
Eircell and Eircom to become serious competitors.



Majella Fitzpatrick, public relations manager for Eircom, in response, admitted
to ElectricNews.Net that there would be some crossover. "We're both in the same
kind of business," she said. However under the terms of Friday's agreement both
companies will still be working together, to a limited extent, in the foreseeable
future.



Also at the AGM Senator Shane Ross launched an attack on Eircom's board for the
losses incurred by Eircom's multi-media ventures. He also noted the dramatic loss
in Vodafone's share value since the deal was announced, which drastically reduced
the value of the transaction by around EUR1.2 billion. He also chastised Eircom
management for its failure to complete an all-cash deal for shareholders.

Tara Delaney, director of communications with Eircell, commented on Senators
Ross's remarks by saying, "We think that the public and the institutions have
overwhelmingly supported the move in the voting today."



In conjunction with the AGM de-merger vote, Eircell also announced that it would
offer "increased value and services to its customers."



One of the new services to be offered will be a new flat fee roaming package for
Eircell customers travelling in Europe. 



The new package, called Eurocall, will become available 25 May 2001 and will
allow Eircell customers to pay IEP0.76 (EUR0.96) per minute when making calls on
Vodafone partner networks to any country within Western Europe, including
Austria, Belgium, France, Germany, Greece, Italy, The Netherlands, Portugal,
Spain, Sweden or the United Kingdom.



"Eurocall is the first tangible benefit of what this new relationship with
Vodafone will bring to our customers." said Stephen Brewer. "It is, however,
only the tip of the iceberg as we plan to roll out a series of new offerings to
our customers over the coming months including price reductions, ongoing service
enhancements, participation in global technology agreements and access to global
content providers." 



In addition to the flat rate roaming service, Eircell expects to roll out its
GPRS services for corporate customers in June, and for retail customers by the
end of the year. The company believes that the merger with Vodafone will allow it
to offer a wider range of GPRS applications and services than would have been
available previously.



The de-merger now leaves Eircom's fixed-line business open for further bidding.
On Friday, potential bidders for Eircom were asked to formulate proposals by the
end of the month. This deadline follows an ordeal last week when the Eircom board
met at 7 a.m. to consider an approach from the eIsland consortium that never
materialised. eIsland and the other two potential bidders, the Valentia
Consortium led by Tony O'Reilly and Dermot Desmond's IIU, are expected to work
within the new structure.