From Socialist Voice, April 2006

More venture capitalists set to take over Eircom

Yet again our former state-owned telecommunications company, Eircom, is to fall into the hands of private financial speculators. This time around it is a proposed €2.4 billion deal that would see an Australian investment bank, Babcock and Brown, buy Eircom by borrowing most of the money and then placing the debts on Eircom—making it the most debt-ridden telecommunications company in the world.
    With interest rates low on the international markets, such debt can be raised quite cheaply, and highly leveraged deals of this nature are very much in vogue. However, as with what occurred under the last clique of venture capitalists to run Eircom, the pressure will then be on to cut costs and capital expenditure. Income received from customers will go to pay debts rather than to finance infrastructural development.
    Clearly such a high-risk acquisition—the second highly leveraged purchase of Eircom by venture capitalists in less than five years—will further compromise investment in our already dilapidated telecommunications infrastructure, particularly in relation to broadband services. It has been precisely such practices over recent years, and the resultant uncertainty created by these kinds of corporate manoeuvres and the billions extracted by private equity owners, that have left Ireland eleventh out of twelve EU countries in the availability of broadband.
    Eircom now faces the prospect of being loaded with a debt of €3 billion, which will be raised so that it can be turned over yet again by a group of financiers with no experience of the telecom business, and no interest in Ireland’s economic development. Quite simply, like Eircom’s previous private-equity owners Providence and Soros, this finance company’s only desire is to squeeze out some juice. There is an obvious contradiction between the strategic requirements of our economy and the desire by successive owners of Eircom to slash costs and boost profits, so as to be able to sell it on at a profit to the next buyer.
    What makes this process even more manifestly a contradiction of the needs of our economy is that the entire “business plan” of Babcock and Brown may well be driven by the fact that the same company pays its senior executives a massive €165 million in bonuses to complete potentially risky deals. Babcock and Brown executives are far more interested in striking a multi-billion acquisition of a phone company to maintain their company’s global growth rates than in anything else. So much for the “logic” of the market.
    And, sadly, it was exactly this kind of future that the CPI predicted for Telecom Éireann back in 1998, when this pivotal state asset was squandered by the Government.


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