13 December 2001 Edition
Eircom fiasco exposed
Director's damning indictment of the company
BY ROBBIE MacGABHANN
This week Eircom's short life as public company ended and so did one of the most appalling chapters in the history of free market fiascos in the Irish economy. Shareholders, who invested in the company in 1999, were left with a loss of one third of their initial investment. There was no shareholder or stakeholder democracy. There was mismanagement, misinformation as a hugely profitable company became easy pickings for transnational vultures.
It is hard to know just where the Eircom fiasco started. Maybe it was the fact that over 500,000 26-County adults parted with their cash to buy something which they already owned. Maybe it was the lavish TV advertisement campaigns, the glossy prospectus that was posted to every registered voter, or the post-flotation name change from Telecom to Eircom, that clocked up another few million in costs.
It is clear where the Eircom flop has ended, with the company, a national resource, dismantled, asset stripped and sold to international companies who have yet to tell any of us, even those in government, just how they plan to nurture and grow a fixed line and mobile phone network that are vital cogs in the future economic development of not just the 26-Counties but the whole island economy.
Last week, Paul Mackay, a former Eircom director lifted the veil and offered an inside view of a directionless management, obsessed with the short term and hampered by a Dublin Government who had no real strategic plan for the company other, it seems, than pocketing the cash from a quick sale.
Mackay is the first director to come public at the company and it is hard not to value his opinion about what was happening at the highest management levels. If only a fraction of what he claims is found to be true, then Eircom management was a total shambles.
The problems at Telecom/Eircom began with the fixing of the flotation share price. The Dublin Government ignored the board's concerns that the flotation price was too high. It was clear within months of the flotation that the price at which the hundreds of thousands of small shareholders had bought in at was unsustainable.
Then Telia, one of Eircom's pre-floatation shareholders announced they wanted to sell their holdings in the company but dallied n the hope of share prices rising again.
Within a year of flotation it was clear that the senior management were determined to break up Eircom and sell off parts of the company. As a national resource there was and still is a pressing need for Eircom to maintain the impressive level of investment achieved by the company during the 1980s and 1990s when hundreds of millions of pounds were invested in modernising the state's telecommunications network.
There is now a need for digital hubs, with broadband technology to be built throughout the state. This enhanced network offers the possibility of huge information flows through our telecommunication networks and a new dynamic to economic development.
These were issues for government and Public Enterprise minister Mary O'Rourke whom Mackay claims asked him to leave the board in 1998, on the basis that she wanted people with more telecommunications experience to come onto the board. Her subsequent appointment of former Fianna Fail minister Ray MacSharry to the Eircom board surprised Mackay.
Mackay believed that she should taken the opportunity to replace chief executive Alfie Kane, whose management style he criticises for fostering a hierarchical structure.
LOGIC AND PANIC
Kane himself also spoke to the media this week. He claims that the break of Eircom was driven by logic and reason and not by panic.
Whatever the competing claims nothing can change the losses absorbed by Eircom shareholders, the lack of management direction for the company or the failure of its Government owners and then significant shareholders to intervene and ensure that the public's interests were being effectively represented.
What is perhaps most appalling about the end of Eircom is that there is no sense that anyone in Eircom or in Government has learnt anything from this fiasco. This week the Finance minister is bringing forward legislation to sell of the government share of ACC Bank and in the coming months Aer Lingus and Aer Rianta are also effectively up for sale. We have yet to see any more efficiencies, or a shareholder democracy even though Irish Life, Greencore, Eircom and now ACC have been privatised.
One wonders, though, if in 1999 the Dublin Government had proposed selling Eircom to international companies how much public support there would have been for such a strategy and now this has been done through the back door. With the other privatisations lined up for sell offs it looks like we are in for more of the same.