The buyer of Irish telecommunications operator Eircom Group has abandoned plans to split the group into separate wholesale and retail entities, dashing hopes of increased competition and lower prices for business users.
Australian investor group Babcock & Brown Capital, which will become the majority owner of the company, had said that it would split Eircom into two companies, one for wholesale and one for retail. That would have been good news for multinationals and other businesses in Ireland, where telecommunications costs more than in many other European countries. The thinking was that a new wholesale company would aggressively seek new operator customers, which would in turn bring more competition to the market and drive down prices.
But Babcock & Brown now says that it doesn’t plan to break up Eircom unless pushed to do so by the regulator — and then only if the interests of stakeholders, including employees, are safeguarded.
Babcock & Brown will own 65% of the new company in a deal announced on Tuesday and valued at €2.4 billion ($3.1 billion). Babcock & Brown is already an investor in Eircom, and has been working on the acquisition deal for months. An employee group will own the rest of Eircom.
For one analyst, the deal’s announcement makes the future less certain for users.
“We could have seen a reduction in telecom costs but now it’s not clear what’s going to happen,” said Padraig Coakley, managing consultant at Mason Communications.
He suspects that the change of heart may have been dictated by the employee group, which increased its stake in the company as part of the acquisition. Reports have suggested that the employee group did not want the company split, he said.
Users of broadband and voice services in Ireland had high hopes that an acquisition of Eircom would produce better services and lower costs. Companies based on the West coast of Ireland, for example, pay more to transport data to Dublin than to the U.S., according to competing service providers.
Recent dealings between Eircom and other operators have thrown a spotlight on the difficulties that competing providers have had in accessing Eircom’s network in order to offer service. BT Ireland, Smart Telecom and Magnet Networks recently called for negotiations with Eircom and the Irish regulator in an effort to improve the process by which competitors can access Eircom’s network. But the three competing operators walked away from the table last month, with BT blaming Eircom for continuing to “frustrate the progress” of opening its network and the regulator for lacking the sufficient powers to force change.
All hope for improvements at Eircom with new owners is not lost, though. “If there’s a change in senior management and the board and they have a different philosophy, then perhaps we’ll see changes,” Coakley said.
Babcock & Brown said that broadband is a key area of focus for the operator in the future and that it seeks to increase adoption with better coverage and more bundles of services. Babcock & Brown also said that services such as VoIP and IPTV could help drive growth.
