Eircom: A crisis created by privatisation

Even based on the current economic situation and the massive rise in unemployment talk of 2,000 further job losses in Eircom is shattering for the Irish economy and the workers in the former state company.

The union leadership in Eircom have been quick to state that the figure of 2,000 redundancies is mere speculation and that they are to sit down with the company over the coming weeks to consider the options before the company.

What is clear however is that management are planning further job cuts. Steve Fitzpatrick general secretary of the Communication Workers union (CWU) has focused his main attack not against the management of the company but against the regulator and the regulatory environment fostered by the government. However the union leadership in the CWU need to look closer to home when trying to understand the position they have taken their members into.

 

History of Privatisation

The reason for the current position Eircom finds itself in is its privatisation a number of years ago and the asset striping by various profiteers since then with the general support of the leadership of union movement in Ireland.

For the trade Union leaders who would like to forget their past position or indeed for workers who are shell shocked at how a once profitable company could end up at the edge of bankruptcy. Firstly it is necessary to look back at how the privatisation of the company came about.

Back in the early 1980’s the old Department of Post and Telegraphs was split into two semi state bodies Telecom Eireann and An Post.
Telecom Eireann was built up at no cost to the state. Supported by state guarantees and its own borrowings Telecom grew developing digital exchanges and expanding later into mobile and early internet services. Telecom became a major employer in the state and paid huge dividends to the government.

Opposition to Privatisation

At this stage the unions affiliated to the ICTU all supported state companies and officially opposed any attempt at privatisation.
Their opposition to privatisation was based on a number of key reasons. The fact that the state companies had been built up by the taxpayer and a sale of them would only serve the needs of large profit driven multinationals.The companies provided huge employment in an economy that was job shed happy in the 80’s. The social role played by many state bodies which couldn’t be measured by an accountant’s pen. Also the example of privatisation in Thatcher’s Britain was seen as a nightmare that shouldn’t be repeated in Ireland. Key a reason was that investment was necessary in these strategic areas of the economy and it was vital that they were not left to the vagrancies of the market. At that stage 10% of Irelands GNP was accounted for by the state sector.

“Parnership , Pragmatism and nest feathering”

However , things were changing and the young leaders of the ICTU including David Begg , John O’Dowd and Des Geraghty were moving to a more “pragmatic” position at the start of the 1990’s .

This “pragmatism” moved the unions to consider the strategic options before each state company. This was followed by David Begg suggesting a Strategic alliance for Telecom . This so-called strategic alliance involved equity and therefore partial privatisation.

David Begg argued for a partnership approach with the company.
However the leadership of the unions in Telecom were warned by the left where this partial privatisation and partnership would lead but they chose to ignore these warnings. David Begg argued at the time that the state would hold a golden share that would be a guarantee against full privatisation.

This was at best a naïve position and at worst open treachery by the leader of the CWU. As feared within a short number of years the company was fully privatised and after stinging the general public with hype on the share value the company was sold to Tony O’Reillys’ Valencia  Consortium with the assistance of the leadership of the CWU led union group. The unions agreed the ESOP (Employee Share Ownership Programme) with the company which was to eventually give them 30% of the shares.

Scandalously Con Scanlon the then General secretary of the CWU (who replaced David Begg) negotiated the deal that privatisised the company in full and in the process pocketed for himself over €1 million thereby becoming the first millionaire trade union leader. Con Scanlon received €600,000 in Eircom shares and massive €1 million top-up of his pension and took over the role of Deputy Chairman of the company. This sort of leadership the union movement could do without.

Over time the ESOP delivered some financial benefits for participants but this was only possible because the union leaders supported the job shedding and the asset striping agenda of the private owners, members were also expected to increase their pension contribution by 5.3%.

However possibly more damaging to the company overall was the imposition of huge debt on the company through the purchase mechanisms used by Tony O’Reilly and subsequent owners, including a group headed up by the billionaire stock market speculator George Soros.

The new owners of Eircom asset stripped the company and invested nothing in the network crying out for investment. The result of this is that the company is left with a debt of over €3 billion with a decreasing market share.

David Begg now ICTU general secretary has admitted that the privatisation of Eircom “was wrong and contrary to the public interest”. However he has shamefully failed to criticize Con Scanlon or even recognise his own role in the position the company finds itself in.

Renationalisation

The current general secretary of the CWU Steve Fitzpatrick has raised the question of the viability of the company in recent weeks which forms the backdrop to the current set of talks. It is believed that the new shareholders STT Singapore will be forced to put equity into the company of over €300 million which will also require the ESOP to invest around €100 million.

However the investment if achieved will not solve the problems of the crippling debt, the pension fund crisis or the shrinking market share .
We could still seea total collapse of this vital company which would have huge ramifications for the economy.

The drive for profit at any cost has brought Eircom to the brink of destruction. The only way this crisis can be resolved is thorugh the renationalisation of Eircom. It should be taken back into state control based on the company being run under democratic working class control and with a strategy to develop a full modern telecommunications network for the country.

A fightback by workers in eircom (particularly those members of the CWU) needs to be launched now and the lessons of the past need to be learned and learned fast. If not the social partnership approach followed by the union leaders could result in all of them losing their jobs.