Ireland Telecommunications Report Q3 2012

While the Irish mobile market expanded this quarter, BMI is still sceptical about the performance of the market over the longer term. With over 120% penetration, an ailing economy and mounting problems at incumbent eircom, the Irish telecommunications market does not have a bright outlook in 2012.

The broadband sector grew minimally, and despite our poor expectations in Q212, expanded at a lesser rate than we originally believed. We have, as a result, made downward revisions to forecasts for the country's fixed-line and broadband sectors.

The challenging macroeconomic environment in Ireland has taken its toll on operators, with eircom entering examinership in Q211 as the debt burden became too much. It was forced to seek examinership in April 2012. The company now has 100 days to restructure its debt, within which time it will be protected from creditors, in efforts to save the troubled company. The importance of eircom's nationwide fixed-line last-mile access network to consumers, businesses and the government means it is unlikely eircom will be allowed to collapse. However, BMI warns that whatever solution is agreed, it will likely amount to little more than short- to medium-term relief.

While eircom’s problems are the most severe, other operators are also had problems this quarter. Vodafone Ireland has received a €400,000 (US$527,000) court fine for failing to prevent thousands of customers racking up combined roaming charges of up to EUR3mn (US$3.95mn), reports the Irish Independent. The customers have been told to contact the company for compensation. According to EU rules introduced in 2010, all mobile operators have to apply a roaming cap of EUR50 (US$66) to customers. Irish telecoms watchdog Comreg claimed Vodafone had illegally deprived customers of this option.

Additionally, O2 Ireland confirmed plans to shed 120 positions in its workforce, according to The Independent. The company has yet to detail where the cuts will fall, but has not ruled out compulsory redundancies. It is seeking to reduce the size of its workforce by around 10%.

ComReg data suggest the number of mobile broadband subscribers in Ireland reached 593,000 by the end of Q411, a y-o-y increase of 3.8%. However, a larger proportion of these are inactive, The number of active SIMs on smartphones and mobile devices totalled 2.09mn at the end of 2011, higher than our previous estimates, and therefore we have increased our forecasts. By 2016 as existing 2G and pure 3G platforms are progressively replaced with 3.5G/4G systems, so the proportion of 3G users will increase to about 2.597mn or 54.3% of the overall subscriber base.