Eircom staff to get €27m tax-free windfall

MORE THAN 14,000 current and former Eircom staff are set to net a pre-Christmas, tax-free windfall from the company’s employee share ownership plan (Esop).

Members were told on Monday that the Esop has decided in principle to distribute 13.5 million Vodafone shares that it owns to members later this month.

Vodafone’s shares closed yesterday in London at £1.74 valuing the stock to be distributed at £23.5 million (€27.2 million).

Esop members with a full allocation of shares from the trust will earn about €2,500 tax-free under the terms of its approved profit sharing scheme agreed with the Revenue Commissioners.

This scheme dates back to the privatisation of Eircom in 1999 and members of the Esop have so far received more than €600 million in tax-free cash.

Individual holdings in the Esop depended on when employees joined the scheme. It was closed to new entrants some years ago and the majority of members have left Eircom.

Members of the Esop are allowed to receive up to €12,700 a year tax free under the terms of the scheme. This is the first payout to the 14,227 members of the Esop since June 2009.

In the interim, the trustees have sat tight while a change of ownership of Eircom to Singapore-based STT was concluded and a new management team led by Paul Donovan drafted a business plan for the company to take account of the changed business environment in the recession.

The Esop owns 35 per cent of Eircom, which is heavily indebted and losing customers. As part of a reorganisation of the business, STT and the Esop are expected to inject capital into Eircom.

The Esop is believed to have accumulated a war chest of more than €100 million in anticipation of having to inject money into the telco. It is not clear how much the Esop might invest and some of its funds might be distributed to members.

The Esop members were informed of the proposed distribution in a communication sent by Jerome Barrett, the chairman of the trust.

Full details of the planned share sale are expected to be communicated in the coming days.

The Vodafone shares date back to the sale of Eircell to the British mobile giant some years ago.

It is understood that the Esop will still retain a large number of shares in Vodafone following the distribution of stock in the mobile operator later this month.

Ironically, Vodafone is one of Eircom’s biggest rivals in Ireland, competing aggressively in the fixed-line, broadband and mobile segments of the market.