Ireland telecoms market
Having enjoyed impressive economic growth following its adoption of the Euro, which helped attract significant foreign investment due to its low corporation tax, Ireland’s economy was hit hard by the 2008 global financial crisis.
By 2009, Ireland’s government was forced to underwrite €50 billion of toxic debt accumulated by the county’s banks and was then forced to accept a bailout of up to €90 billion from the EU and the IMF in late 2010.
All of which has had a significant impact on the country’s telecoms market. Overall telecoms revenue fell by 2% in the first quarter of 2012 compared to the same period in 2011, and the country has become increasingly reliant on the private sector for investing in telecoms infrastructure.
Ireland’s fixed sector is led by troubled incumbent telecoms provider, eircom, which was established by Ireland’s Postal and Telecommunications Service Act in 1983. It maintained exclusive rights to telecoms infrastructure, voice telephony, satellite communications, telex and paging until 1996.
The company was floated on the Irish, London and New York Stock Exchanges in 1999 before being acquired by Valentia Telecom in 2001. Valentia was to be the first of many owners of the company as it suffered a financially turbulent decade.
This year, in order to avoid a default on its €3.75 billion debt, eircom was forced to put itself up for sale. Eventually it applied for examinership and emerged from the process with a changed shareholder structure under a new holding company, eircom Holdings.
The equity of the firm is now owned entirely by its 200 lenders, led by US investment company Blackstone, and €1.7 billion of debt was removed from the company’s balance sheet.
Former shareholders Singapore Technologies Telemedia and Employee Share Ownership Trust lost their stakes in the company. eircom is still expected to be sold in the near to medium-term but it is understood that the company will pursue a five-year business plan in the meantime.
Henry Lancaster, senior analyst for Europe at BuddeComm, believes any plan could prove redundant as a potential buyer of the company might asset-strip and sell off the pieces. “This has been the history of the company since privatisation, which led to a small number of people becoming rich while the company itself was disastrously managed.”
eircom’s inadequate investment over the years has led to fixed-line and mobile customers jumping ship. The company’s share of the fixed market has dropped from 67% to 56% in the last two years according to BuddeComm. DSL growth in Ireland is overall retracting, but cable broadband has grown by 26% in Q1 2012 compared to the same period last year.
These figures are a reflection of eircom’s poor investment history, which has forced consumers to switch to cable rather than wait for the company to upgrade its own infrastructure.
eircom’s loss has been UPC’s gain. The cable provider reported a year-on-year subscriber growth of 25% in June and has invested in DOCSIS3.0 cable technology.
Ireland’s difficult economic situation has also been felt in the mobile market with TeleGeography reporting that mobile subscribers declined by 0.7% over the past 12 months.
Difficult economic conditions have forced operators to cut costs, and it prompted Vodafone and Hutchison Ireland to sign a network sharing agreement in July. It is estimated that the agreement could save both operators over £200 million in the five years.
The nation has, however, been increasing its international connectivity, with plans for a new route connecting New York and Ireland’s west coast with a branch to Iceland were revealed last year. The Emerald Express cable will be ready for service by August 2013 and will offer wholesale low latency services to carriers, ISPs and the financial services sector.
Subsea cable investment between the UK and Ireland ground to a complete halt just after the turn of the century and it has taken almost a decade for new cable projects to emerge.
In January of this year, the 131km CeltixConnect cable went live providing the lowest latency route between Dublin and the UK. This cable alone doubled existing capacity between the two countries and was deployed specifically to meet the demands of Dublin’s data centre industry.
Diane Hodnett, CEO of Sea Fibre Networks, which owns the CeltixConnect cable, believes that there is still not enough fibre investment taking place in Ireland, particularly outside of the capital. She also suggests that more needs to be done to develop the transit route between Dublin and Cork.
“There has been a general lack of investment in Ireland, in many cases because it is a small market, meaning that providers tend to look at other western European countries first. We need to find a way to incentivise providers to invest more here, and by putting together all the national infrastructure assets and making those available on a competitive or commercial basis without interfering with the natural market forces would go a long way towards that.”
Population (July 2011 est.)
Urban population (of total population, 2010)
GDP (2011 est.)