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Private Equity Leveraged Buyouts in European Telecoms: The Case of Eircom

Listed author(s):
  • Donal Palcic
  • Eoin Reeves

    (Department of Economics, University of Limerick)

Highly leveraged buyouts (LBOs) of former state owned telecoms operators by private equity groups have occurred in a number of countries in recent years. This paper examines the case of Eircom in Ireland which has experienced five changes in ownership since full privatisation in 1999, two of which were LBOs. Enormous increases in Eircom’s debt levels as a result of the LBOs resulted in the company’s bankruptcy in 2012. This paper argues that this outcome was largely attributable to the short-termist strategies adopted by the private equity groups that assumed ownership of the enterprise. These strategies included high leverage, cash extraction and underinvestment in the fixed-line network which contributed to the demise of the enterprise and had wider economic and social effects. The Eircom case demonstrates the risks attendant to ownership of important network infrastructure by private equity groups and the need for regulatory safeguards to protect the public interest.

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File URL: ftp://s120.ul.ie/RePEc/lim/wpaper/WP012012.pdf
File Function: Revised version, June 2012
Download Restriction: no

Paper provided by University of Limerick, Department of Economics in its series Working Papers with number WP012012.

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Length: 24 pages
Date of creation: Jan 2012
Date of revision: Jun 2012
Publication status: Published in Telecommunications Policy, 2013, Vol. 37, pp. 573-582
Handle: RePEc:lim:wpaper:012012
Contact details of provider: Web page: http://www.economics.ul.ie

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