Swisscom confirms dialling Eircom’s number

Swisscom is looking to Eircom to expand outside Switzerland Keystone

Switzerland's leading telecoms operator, Swisscom, has confirmed it is in takeover talks for Ireland's Eircom, in its latest bid to gain a foreign foothold.

But Swisscom said in a terse statement that there was no certainty that an offer would be made for Eircom, the principal provider of fixed-line services in Ireland.

Swisscom added that a further announcement would be made “when appropriate”.

The cash-rich Swiss company has made no secret that it has been looking for acquisitions abroad. However, it has been unsuccessful in recent attempts to buy Telekom Austria and Cesky Telecom of the Czech Republic.

Quoting sources on Tuesday, Reuters said Eircom had agreed to allow Swisscom to look into its books after an indicative price was settled, valuing the Irish company at more than €2.6 billion (SFr4 billion).

Under pressure

Swisscom – the former state monopoly – is under pressure to find sources of income in its own home market, where it has been facing increasing pressure from companies including Cablecom and TDC-controlled Sunrise.

The Bern-based company has also been mentioned as a possible bidder in the battle for Denmark’s TDC.

Analyst Panagiotis Spiliopoulos at Bank Vontobel is one of several analysts who question the rationale of a possible Eircom takeover by Swisscom.

“From a strategic viewpoint it doesn’t make much sense, but that’s true for almost all incumbent players in Europe,” he told swissinfo.

“With Eircom you don’t have any growth initiatives or any growth potential such as you had with Cesky Telecom or Telekom Austria.”

Few synergies

“For Eircom it’s exactly the same story as for Swisscom: fixed line under pressure, strong competition, mobile market already highly penetrated, so there’s not much there in terms of synergies,” he added.

Other analysts say Eircom faces increased regulatory pressure and consumers are increasingly using mobile phones rather than landlines to make calls.

Eircom aims to have 500,000 broadband customers by December 2007 to drive future revenues and offset competition in the voice market.

It is also moving back into the mobile market, with shareholders in September approving a €420 million takeover of Ireland’s Meteor Communications.

swissinfo with agencies

Key facts

Turnover at Eircom in 2004 was almost SFr2.5 billion ($1.9 billion).
The former Irish monopoly player made a loss of SFr160 million.
Eircom has a staff of just over 7,250.
Swisscom’s turnover last year was just over SFr10 billion. It made a net profit of almost SFr1.6 billion.

In brief

Swisscom says it considers various investment opportunities on a regular basis.

The group has money to spend, has no debts and cannot expand in its home market.

Swisscom failed in its advances for Telekom Austria and Cesky Telecom of the Czech Republic.