August 26th Morning: The Recession Diaries

Enough is enough is enough. Our telecommunications industry is being turned into dog meat and we are powerless. The current owners, the home boys Down Under at Babcock & Brown, have seen their share price plummet by 90 percent over the last year, they’ve dumped their top executives, they’re groaning under debt and nobody seems to be able to understand their company structures anymore (Emmet Oliver described it as having ‘mind-expanding complexity’.)

Up to recent, Eircom officials have been claiming it's business as usual. Yeah, right. ‘Sources’ report that B&B have made contact with financiers about off-loading Eircom, though this won’t be easy given that

(a) the company is saddled with €4.2 billion (yeah, that’s right – €4.2 billion),

(b) it has the highest debt-to-equity ratio of any European telecom company, and

(c) the credit crunch is going to make it difficult for interested parties – if there are any – to put together the money.

To top all that off, ComReg has just issued a pretty damning report on Eircom’s operation – saying that its performance is in serious decline. Waiting times for business and residential hook-ups, as well as reported faults, have all deteriorated. Broadband? You don’t want to go there.

Should anyone be surprised? Eircom has been feasted on by asset-sweaters and short-termist owners ever since Fianna Fail sold the thing off. It has had five different owners in nine years (and this promotes long-term investment strategies ... how?). Does anyone really believe that B&B will take our economic interests into account when they negotiate a new sale? They’ll take the best offer and run like hell.

So what should be done (besides putting Mary O’Rourke, the architect of the privatisation, into the stocks and forcing her to apologise to each and every citizen in the Republic)? There’s no sense in asking the Left. They’ll just come up with their usual knee-jerk response about nationalising Eircom, taking it into public control, blah, blah, blah. That’s their response to everything.

No, let’s ask the ‘real economists’, people who understand the complexity of open and liberal markets. Let’s ask the High Priest of neo-liberalism, Dan McLaughlin, who hangs out at the temple of the Bank of Ireland; and one of his anointed acolytes, Jim Power, currently sacrificing statist goats over at Friends First. They’ll know the correct and market-practical steps to take. What do they say?

‘Two economists have joined with a trade union leader in calling for Econ to be re-nationalised by allowing the state’s National Pension Reserve Fund to invest in the company’s network.’

 Uh, er, ehm . . . re-nationalised? I know this call was from 2006, just prior to B&B buying up the company, but hey.

‘‘It [Eircom] has been treated to a series of owners who extracted money to the detriment of capital expenditure,” said Power. ‘‘What is needed is a mechanism to ensure that the company is run on a commercial basis. By allowing the pension fund to invest that would be guaranteed.” McLaughlin said: ‘‘One solution is to buy back Eircom into state hands. The government would be getting it back cheaper than they sold it for and then run it like the private equity houses would do. There is a lot to be said for buying Eircom back . . . .”

If that doesn’t spin my ideological weather-vane: two leading neo-liberals calling for nationalising one particular commanding height of the economy. The comrades over at the Socialist Worker couldn’t have penned it better.

But actually it isn’t all that strange. Unless one is completely blinded by dogma, some things make sense. Take Cumann na Gael – our most right-wing Government ever. They were so antagonistic to state interference they’d let people starve in the ditches just to get their budget numbers right. But when it came to electrification, they took the pragmatic course. In the late 1920s there were over 100 private electricity suppliers (talk about a ‘competitive market’). And yet only 12 percent of buildings had electricity. So the Government set up the ESB (and were denounced as Bolsheviks) and got the job done. Sometimes dogma and reality don’t mix.

And the State (i.e. the public, the taxpayers, the citizenry) would be getting a good deal to boot.  Last year Eircom reported profits of €680 million. This year its profit is expected to be €750 million. 

So there you have it: Left and Right united around a common cause. To develop our infrastructure, to use our national savings to invest to our economic advantage, to modernise and competitive-ise – in three simple words:

BUY BACK EIRCOM.

As slogans go, it sounds good to me.

(Watch out for further posts in the ‘Mess With My Ideological Head’ series: Business Men and Women Really Hate Competition, The Corporate Sector Demands More Public Subsidies, How the Right’s Spendthrift Ways are Bankrupting the Economy’).

Comments

[Pavement Trauma]

I would suggest a small (but more worded) refinement: Buy Back the Eircom Network.

There is absolutely no need for the State to own Meteor or the retail side of Eircom.

Furthermore the network should be bought outright and not in a joint shareholding with the ESOT/ESOP. There should be no more sweetheart deals for the ESOT/ESOP - they should get the same as any other shareholder, no more or less.

[Michael Taft]

Okay, let's agree on 'nationalise the network'. Who knows, agreement on this issue might portend greater agreement on other issues in the future. Consensus builds consensus.