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Eircom's acquisition of mobile operator Meteor has set pulses racing in Ireland as the former monopoly re-enters the lucrative Irish mobile market.

Eircom's successful €420m bid for Ireland's third mobile operator Meteor was officially announced at the company's AGM (annual general meeting) on yesterdy. The news was widely expected, following Smart Telecom's withdrawal from the bidding race on Friday, leaving no bidders but Eircom; a Denis O'Brien-led consortium had backed out the previous week.

The Consumer Association of Ireland says the acquisition is good news for Irish consumers, but other parties aren't so convinced. Bernard Durkan, Fine Gael's spokesperson on Communications and Natural Resources, gave the deal a more guarded welcome.

"Amidst all the talk of shareholders and rights issues, there has been only a nod in the direction of Irish mobile users who have had to deal with the highest mobile costs in Europe," he said, in an email statement. "While Eircom's arrival in the market may see increased competition, the fact that the State's dominant landline operator is now a mobile player means questions need to be asked."

Certainly the Irish mobile market could do with a heavy dose of competition. The two main players, Vodafone and O2, together control around 90 percent of the market. Meteor had been making more of an impact of late to the point where it now controls around 10 per cent of the market, serving around 410,000 customers.

But despite Meteor's increasing customer numbers it is still positioned at the wrong end of the market, with a strong dependence on pre-paid customers. The post-paid market, where Vodafone and O2 dominate, is the more valuable segment and Eircom will need to make that evolution quickly with Meteor if it is re-coup some of its €420 million.

Eircom is adopting a bullish attitude saying it expects to double Meteor's current market share within the next three to four years. Anthony O'Reilly, chairman of Eircom, is confident that the acquisition will "transform the growth prospects for Eircom," while also promising to remain the low-cost operator of the market.

The acquisition puts Eircom in a unique position, making it the only company offering fixed-line, broadband and mobile services to Irish consumers.

"The acquisition of Meteor gives Eircom a winning combination of broadband and mobile. This has been our goal since returning to the market last year," said Dr. Philip Nolan, CEO of Eircom. "We look forward now to providing our unrivalled base of 1.4 million customers with our newly acquired mobile capability, as the only company which can offer Irish consumers the full range of services - voice and data, over landline and mobile."

The acquisition, which is conditional on shareholder approval, will be funded by a rights issue at a minimum subscriber price of €1.10 per share. The Employee Share Ownership Trust (ESOT) which holds 20.9 per cent of Eircom's shares, says it will vote in favour of the acquisition and the rights issue; it intends to take up its rights in full.

Eircom left the mobile business in 2001 when it sold its subsidiary Eircell to Vodafone for IR£3.3bn. Eircom's non-compete agreement with Vodafone ran out last summer.

Copyright © 2005, ENN

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