Eircom suffers fall off in voice revenues

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Falling voice revenues and acquisition costs affected full-year underlying earnings at Eircom, the dominant Irish telecoms group that is the subject of a takeover bid.

Revenue rose from €1.6bn to €1.69bn and pre-tax profits were €24m higher to €112m, although this was boosted by €52m from the sale of property and investment. Earnings per share were €0.08, up from €0.07 in 2005.

Voice and traditional data revenue, which make up the vast majority of sales, fell by 8 per cent during the year. This was only partially offset by rapid growth in the smaller mobile phone and broadband internet businesses. Also affecting profits was a rise in non-cash pension expenses to €52m from €15m.

Earnings before interest, tax, depreciation and amortisation (ebitda) and also excluding restructuring costs, the property sale and the non-cash pension charges were €601m, compared to €610m in 2005.

The company said Meteor, the mobile operator that Eircom bought in November had contributed to a rise in operating costs and capital expenditure, with the latter also boosted by the broadband rollout.

However Meteor contributed €4m to ebitda in the four months to March and the investment in broadband “is now delivering consistent growth, with around 250,000 customers today,” said Philip Nolan, chief executive.

The company announced a second interim dividend of €0.052, as it had previously forecast.

Eircom in April received a €2.20 per share offer from Babcock & Brown Capital, a listed investment fund managed by the Australian financial services company that is already a 28.8 per cent shareholder. The offer values the company at €4.3bn after including €1.9bn of net debt and was recommended by Eircom’s board. Discussions between the two parties and the employee share trust, which owns 21.8 per cent of Eircom are under way.

Eircom said on Monday these discussions and due diligence were continuing and “a further announcement will be made if and when appropriate.”

Swisscom was last year poised to buy Eircom before the Swiss government blocked it from completing any foreign takeovers.

The shares were €0.03 higher in mid-morning trade.

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