O'Reilly to step down after mobile move

Sir Anthony O'Reilly is to step down as chairman of Eircom soon after the company begins its move back into the mobile market with the acquisition of Meteor.

The departure is likely to come within the next three months, bringing to an end Sir Anthony's four-year involvement with the company.

He took up the role of non-executive chairman after he was involved in the Valentia consortium's privatisation of Eircom in 2001 and stayed on when the company floated again last year.

It is understood that he wanted to remain with Eircom to oversee its transition back to a mobile, landline and internet business.

Eircom is currently finalising its plans to buy Meteor for about €420 million.

The company hopes to be ready to announce the deal, along with an accompanying rights issue, when it holds its annual general meeting in Dublin on Monday.

The value of the rights issue will be higher than €350 million, with sources yesterday pointing to an issue of €400 million at the very least.

Davy analyst Jack Gorman noted yesterday that a €420 million price tag for Meteor will make the deal "very expensive" on the basis of other mergers and acquisitions in the sector.

"Given the additional marketing and capital expenditure spending that could be associated with the deal, it is clear that Eircom will be promoting the deal on future prospects rather than current performance," Mr Gorman noted.

He said this would be particularly true because the deal will probably dilute earnings per share in the near term and would be cash-absorbing, particularly if the cost of a 3G licence is included.

Along with a number of other applicants, both Eircom and Meteor have applied for the State's final 3G licence.

Success in this effort would require Eircom to pay almost €50 million to the communications regulator in the first year.

Shares in Eircom strengthened yesterday, closing four cent higher at €1.87.

Mr Gorman has calculated that a €350 million rights issue at a notional discounted price of €1.75 per share would create 200 million additional shares and cost an extra €22 million in dividends.

On this basis, a €400 million issue - now seen as more likely - would see 228 million new shares being created. This in turn would lead to a new €25 million dividend cost.

"Price tag aside, strategically Meteor makes sense for Eircom," Mr Gorman.

It emerged on Thursday that Smart Telecom, another suitor for Meteor, had pulled out of the bidding process.

The withdrawal followed the exit of telecoms entrepreneur Denis O'Brien from the process a week ago.