The myth of competition
Eircom carve up not in our national interest
BY ROBBIE MacGABHANN
The corporate knives are out. This month's target is the Irish telecommunications company Eircom. International and Irish vultures are circling the hugely profitable but still undervalued company.
Just over a year ago, Telecom became a private sector company with a £4 million advertising fanfare. Within months it had a new name, Eircom, as well as another multimillion advertising spend to launch the new corporate logo and image. The Eircom make over has also heralded months of directionless management and a share price now in free fall with hundreds of thousands of unhappy punters wondering where their money went.
Eircom has hit the news again in the last two weeks because of the potential carve-up of the company. What has not been recognised is that one near monopoly has been swapped for another
The million-punt salary pay out to chief executive Alfie Kane and to Malcolm Fallen only worsened the public perception of the company. The gloss on the crisis was that two former Dublin Government ministers Ray MacSharry and Dick Spring, now safely ensconced as Eircom directors, had sanctioned the six-figure pay rises for Eircom's top management.
Why? Because the wages paid were, we were told, the `competitive rate'. It was the same basic logic that also caused the sell-off of Telecom in the first place. Eircom's landline business was a monopoly and its ownership of one of the three mobile phone companies together with its two Internet service provider companies and the Golden Pages franchise gave it too much market power.
For the consumer, forced competition into this market would mean lower prices and a greater choice of telecommunication products. The reasons why the state had actually invested the hundreds of millions of punts into creating Eircom in the first place were forgotten.
Eircom exists as a company because there was recognition of the economic necessity of developing the state's telecommunication infrastructure. In an international economy where communications and computer technology was becoming the primary economic resource, it was imperative to invest in developing telecommunications networks, as this is the cornerstone of the information economy and the digital revolution.
The Internet, mobile phones, fax machines, ATM machines, telesales, transnational TV pictures all depend on having a proper telecommunications infrastructure. The phone and fax is the hub of most offices today, no matter what business you are in.
Eircom has hit the news again in the last two weeks because of the potential carve-up of the company.
International communications giant Vodafone is to buy Eircell, the mobile phone arm of Eircom, for £3.94 billion. Share prices rallied and increased by 20% on the news. However the stock market had barely caught its breath when former ESAT chairperson Denis O'Brien stepped in with a £1.73 billion offer for Eircell's landline network and ``related business''.
The Eircom board are likely to reject the bid from O'Brien's e-Island consortium, but have signalled that they are not averse to a sale at the right price. Again, all of this wheeling and dealing is just part of the free market at work and is supposed to be better than the social monopoly market over which Eircom previously presided.
However, what has not been recognised is that one near monopoly has been swapped for another. Take Vodafone for example. It is Europe's largest mobile phone operator, with over 42 million customers in 15 states. The second operating mobile phone franchise, Digifone, is part of British Telecom. So our mobile phone market is now owned by two transnational companies, both of whom wield considerable economic power. This power is far greater than what Eircom ever had, but again this is acceptable competition.
other arena where this so-called competition has emerged is in cable TV networks, which are now being updated to offer internet and phone services also. In Dublin, the 370,000 Cablelink network was 25% owned by RTE and 75% owned by Eircom. It was sold to the hugely expanding international cable company NTL for nearly £600 million. One of NTL's major share holders is Microsoft and the company is emerging as one of Europe's largest cable companies.
Most of the other cable networks outside Dublin have been amalgamated by acquisition into a company called Princes Holdings, trading as Irish Digital Multichannel. Its two core owners are Independent News and Media, Ireland's largest print media group and a US company called Telecommunications Inc (TCI). TCI are one of the top seven TV companies in the USA and have huge interests in cable networks around not only the US but now Europe. Again their hugely influential role in the Irish cable market is just `healthy competition'.
Ireland has four core Internet service providers, Ireland On Line, Ocean Free, Indigo and Eircom net. Indigo and Eircom are owned by Eircom, while BT are the effective owners of the other two companies. Once again just another example of `healthy competition'.
Now the Dublin Government are subsidising the cost of a new trans-Atlantic high speed fibre optic cable and the roll out of other fibre optic cable rings with a £250 million subsidy as well as sinking millions of punts into the development of the National Digital Park in Dublin's City West. This is being done to make sure the economy has access to a top level telecommunications infrastructure.
Surely, if the competitive market is useful, it would take on the costs of this investment. However, when it comes time to sell off this infrastructure in years to come, you can be guaranteed that the international business community will be first in the queue to buy.