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eircom ESOPTrustee

• elRCOm

Managing employee share ownership

On 4th January 2010,

STT completed their acquisition of eircom Holdings Limited, the former

Babcock company that owned 57.1% of eircom. becoming

It resulted in Emerald Communications

the top company in the eircom Group structure.

shareholdings

in ERCIE SPC for equivalent shareholdings

eircom faces a challenging

future in uncertain

need to invest in technologies policy that encourages

economic

As part of the transaction,

and an appropriate

networks & services that the Irish economy need.

eircom ESOT exchanged

in ECC. times. The company has Significant debt, and there is a

for the future in the fixed, broadband

investment

(Cayman) SPC ("ECC'')

and mobile markets. Having a Government

regulatory regime are key to delivering the next generation

it


The ESOP board is aware s : and rumour circulating about distribu tion will occur. The normally react to specularion ""'bearing in mind what it has Extra 20 and 21, it wishes 0 L=.=':"';;:: position.

We believe eircom is a viral en economy As a major shareho well positioned to input into UCLCLU.-'! determine the future direction of eirrrxn ultimately how this impacts on the ==- ecurity of its employees and pe io .. perhaps the most challenging time '- ---,- r-twenty years.

The ESOP board believes that i ' it take a careful and considered vi developments in eircom, uch as possible investment plans, debt restructurin before making any precipitou decisi ~ a duty of care and a responsibility to an . prudent and considered manner and -0 IlI<:Ui.i;..a.Iil the high standards that it has consisten over the past ten years.

The board is equally aware that it will need to take ome decision on the next Distribution during the course of the year, and at the appropriate time it intends to do so. The ESOP board m decide on the question of further inves eneircom.

Both these decisions are not mutually exa re, but the resources to do either or both are '~. ensible and prudent therefore rhar e i:Âť board has all the necessary information <ÂŁ'. ',:. "hen making such decisions. Forem regard is the company's business pia: ' - ' plan, which is currently under p : the company, will lead to the determiaazjoa of new capital requirements of eircom 'ard. The ESOP board intends 0 concccr ment of the implication that '. ess plan when that is completed.

The ESOP board, as before, will take the necessary legal and financial advice, as it is obliged to do, in relation to the foregoing before arriving at any decisions. Ultimately such decisions must be balanced, prudent, and in the best interest of eircom ESOP beneficiaries.

. h to see the ESOP continue to have a role and influence in eircom for the mreseeanie future and to seek to get the best o investment over the medium to - rerm. The vast majority of beneficiaries, - er retired or not will continue have a very teresr in eircom remaining a financially secure company for many years to SJLiLf~'C

e.

e ESOP has delivered impressive returns for beneficiaries to date while also maintaining an ability to input on key strategic decisions that affect the direction of the company and i financial stability. Its credentials in terms of delivering for beneficiaries are second to none and it will strive to do the very best by beneficiaries over the remainder of its lifetime.

In the meantime, the ESOP board will continue to work with the other shareholder to develop greater clarity around the key business issues outlined above. When we have a better understanding of these, the board will be in a much better position to make informed decisions about what is in the best interests of beneficiaries and what actions it should take in regard to making further Distributions


ESOT Assets June 2009 v's May 2010*

The following report provides an update on the ESOT and APSS results for the Financial Year ended 30 June 2009. Key Results Distributions

to the value of €69.7 million made to

benefictaries. ESOT acquired

49_6 million ERCIE SPC Preference

Shares

in a Rights Issue Impairment €193.8

to ESOT's 35% investment

in eircom of

million*

ESOT Borrowings

reduced

by €13million

Dividend Income down 46% to €7.7 million ECC Ords

ECC Prefs

Vodafone

Cash

Expenditure

• Un-audited.

At the end of the financial year the ESOT's et Assets totaled €154.27 million, reduced from €432 million in the prior year. The reasons for this are as follows :

Movement in value of Vodafone shares during FY to 30 June 2009 €70

The requirement for ESOT to reflect the impact of an impairment charge reported by eircom in its half-yearly accounts to 31 December 2008, in its own accounts for the financial year 2009. The ESOT distributed Shares from the Trust Fund to the value of €69.7million during the financial year; and

•......•.... .....•...••..

€60

...•.

Movements in the Vodafone share price and Sterling-Euro exchange rate .

...•..

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"..

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down 1.4% to €3-9 million**

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As indicated in ESOP Extra 20, the ESOT borrowed €49.6 million in a short-term loan in]une 2009 to subscribe for 49.6 million ERCIE SPC Preference Shares in a Rights Issue. The ESOT repaid these borrowings from proceeds of the BCMIH Preference Share redemption on 30 ]une'2009. 2.25million Vodafone shares continued to be held in the APSS on behalf of 1,896 beneficiaries. The ESOP Unit can assist beneficiaries who wish to arrange to have these shares transferred to them or sold on their behalf.


Recent months have been a very b The arrival of STT as a long term

_-period or the eircom Board and Executive Committee.

- -

ic shareholder

We have established a new et of worki management

practices to create a productive working environment with the

team.

The most important issues which we •

The development

Identifying areas where we can

shareholders

of a realistic. a

continue

[0

addres

include;

ievable and investable plan for the future, based on a clear strategy; • -e custorne

• A new integrated organisation •

has heralded a new period in the company's history.

more effectively at lower cost;

bringing together our fixed and mobile networks and IT as one;

The creation of a stakeholder ap

0

Ensuring that the way forward

position eircom as a trategic business within the country;

the furore

Strategic options to addv

Putting a management [earn in place -

the

0

0

me pension scheme;

our balance

-

heet;

relecom

experience as well as promoting talent from

within the organisation eircom continues to operate in a market with compe , , -eoeconomic and recessionary pressures, and is focused on reducing it'S cost base so a to become more compeuuve. It is intended to compete more aggres ively acro launch of

ext Generation Broadband

all egrnents of the marketplace and this is reflected in the

ervices. new mobile internet propositions and cloud computing services for

corporate customers. This is a very tough agenda", ith many elements both intemallv and externally to be put together if we are to reach a uccessful outcome for the busin

going forward, eircom _Ianagernent have presented to the ESOP Board on

aspects of the business and this will continue during the year.


Recent months have been a very b The arrival of STT as a long term

_-period or the eircom Board and Executive Committee.

- -

ic shareholder

We have established a new et of worki management

practices to create a productive working environment with the

team.

The most important issues which we •

The development

Identifying areas where we can

shareholders

of a realistic. a

continue

[0

addres

include;

ievable and investable plan for the future, based on a clear strategy; • -e custorne

• A new integrated organisation •

has heralded a new period in the company's history.

more effectively at lower cost;

bringing together our fixed and mobile networks and IT as one;

The creation of a stakeholder ap

0

Ensuring that the way forward

position eircom as a trategic business within the country;

the furore

Strategic options to addv

Putting a management [earn in place -

the

0

0

me pension scheme;

our balance

-

heet;

relecom

experience as well as promoting talent from

within the organisation eircom continues to operate in a market with compe , , -eoeconomic and recessionary pressures, and is focused on reducing it'S cost base so a to become more compeuuve. It is intended to compete more aggres ively acro launch of

ext Generation Broadband

all egrnents of the marketplace and this is reflected in the

ervices. new mobile internet propositions and cloud computing services for

corporate customers. This is a very tough agenda", ith many elements both intemallv and externally to be put together if we are to reach a uccessful outcome for the busin

going forward, eircom _Ianagernent have presented to the ESOP Board on

aspects of the business and this will continue during the year.


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