Eircom to raise €423m in rights issue

Eircom said it would raise €423m in a rights issue to fund its planned acquisition of Meteor as Ireland’s dominant fixed-line telecommunications company seeks to return to the mobile market.

Eircom, which announced its planned €420m acquisition of Meteor in late July, said it planned to issue 313m new shares representing 29 per cent of its enlarged issued ordinary share capital. The 5 for 12 rights issue will be priced at €1.35 per ordinary share, a 24 per cent discount to the closing price of €1.78 on August 29.

In July, Eircom had said that it would fund the acquisition by selling shares for as low as €1.10 a share, or at a 41 per cent discount to the previous day’s closing price. Eircom shares, which at that time fell 16 cents to €1.73, held steady at €1.76 in early morning on Tuesday.

Philip Nolan, chief executive, said: “Offering the rights issue at a subscription price of €1.35 is a significant achievement and is underpinned by the strong strategic rationale and the expected financial benefits of the Meteor acquisition.”

Eircom is suffering from revenue decline amid price erosion due to fierce competition from both fixed and mobile operators. That has prompted it to move on Meteor more than four years after selling its Eircell mobile network to Vodafone for €4.3bn.

Although the offer is in line with prices paid for other recent mobile assets in terms of price per subscriber, Meteor predominantly has a pre-pay customer base of people who spend much less than contract customers.

Eircom aims to double Meteor’s market share from 10 to 20 per cent. Vodafone and O2 together have a 90 per cent share of the Irish mobile market.

The rights issue is fully underwritten by Morgan Stanley and Goodbody Stockbrokers and there will be an extraordinary general meeting on September 15 to approve the acquisition of Meteor and rights issue.