Long way to go yet on Eircom-SwissCom deal - Eircom was first owned by the state. Then it became substantially owned by small shareholders. Then it was bought out by financiers. Then it was sold again to big shareholders and now, it appears that we may well be paying our telephone bills to the Swiss. Following yesterday's approach by the Swiss-government controlled SwissCom, Eircom shares finished the day up 31 cent at €2.40. That compares to its float price in March 2004 of €1.55. Valuations like that mean the Swiss approach must be taken seriously by top management at Eircom. They will presumably decide over the coming days whether to permit a due diligence process to begin.
Like Eircom, SwissCom is a former state monopoly which became a plc in 1998. It is still two thirds owned by the Swiss Government. In the first six months of this year, it had 15,300 employees and served almost three million land lines and close to two million broadband and ISDN lines. It also has four million mobile customers. Cablecom, its most serious domestic rival, cancelled an initial public offering in favour of a last minute sale to Liberty Global of the US. The deal will significantly raise the financial firepower of Cablecom, now increasingly straying into SwissCom's core territory of fixed and mobile telephony. The company's web profile says it is the biggest mobile and fixed line player in Switzerland and that it intends making targeted investments in Europe. It has recently taken a majority stake in a Hungarian Telecoms company and but was beaten by current O2 suitor Telefonica for a deal in the Czech Republic. It also has a position in the pay TV market. SwissCom is also cash rich. It has between €10-12 billion to play with, but the company has been criticised for failing to take advantage of snapping up telecoms companies in recent times when prices were considerably cheaper than they are today.
The head of research at Dolmen Stockbrokers, Stuart Draper, says there are not many European telephone companies small enough to takeover any more and that is one reason by SwissCom may be interested in Eircom. This is especially true after a failed attempt to take over Telecom Austria earlier this year. Ireland's economic growth story is also a major attraction for any company, he adds.
However, the analyst cautions that there are still risks to the deal actually going through. He says that SwissCom have yet to carry out due diligence on Eircom and adds that the company's ESOP members have to be brought on board. He also warns interested shareholders that the Eircom share price may not go much higher than yesterday's €2.40. He says there is a long way to go on the story yet.
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Consumer spending continues to be good news for Exchequer - Figures last night showed that the Government is continuing to benefit from massive windfall tax gains due to strong consumer spending and house sales. At this point, no-one is predicting anything too negative in next month's Budget. Tax receipts are running at more than €1.2 billion ahead of the target set at Budget time. VAT receipts and stamp duties on the purchase of houses are both running ¦425m above target for far this year.
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Third level students good with their money - BOI - Bank of Ireland is telling us that third level students are their best customer grouping when to comes to managing their money and their borrowings., The bank says its students' loan book carries the lowest level of bad debt with student incomes now more than adequate to support borrowings. Patrick Farrell, Marketing Manager of Personal Banking at Bank Ireland, says that students are very good at not paying too much interest on their credit cars.
