Ireland has been reading about yet another prospective financial transaction at the much bought, much sold, Eir.
The telecoms company recently announced an intention to sell nearly half of the company’s fibre network in Ireland, a transaction that would net the business significant capital. However, this time it might be good news not just for the company and its employees, but also for its customers and for taxpayers.
That’s because Xavier Niel, the French investor who is the majority owner of Eir, has been very clear that he wants to own the asset for the long term.
Based on what I’ve seen of Mr Niel’s career, as well as recent moves he’s made, I believe him. He has a track record that inspires confidence.
The company could reinvest whatever capital it realises from any sale back into the business.
So I believe this prospective transaction suggests Eir wants to upgrade a network that has long been overlooked and underinvested in.
As the chairman of National Broadband Ireland (NBI) I’ve seen first-hand what that underinvestment looks like. Our 1,800 hardworking men and women are often working in decrepit manholes, crushed ducts and sagging cables from crooked poles. The network needs fixing.
Now that Eir has an owner who says he’ll invest for the long term, we should applaud this move. The issues with Eir’s infrastructure stem directly from the fact that the company’s ownership has changed hands more times than American kids trade baseball cards.
This is what happens when you have owners and operators who are focused on their short-term goals, not the long-term health and stability of the system. Moving to an ownership group with a long-term investment model will have real benefits, chief among them the ability and desire to properly manage, maintain and improve the system so that it can properly serve the people of Ireland far into the future.
These rusty remnants of past owners and operators reflect previously-held short-term goals. And we all suffer. Ireland cannot reach its potential without a modern telecommunications infrastructure.
Fortunately, we can do better.
A different ownership model – built around long-term investing – encourages ongoing maintenance and improvement of the system. It is a system on which the energetic people of Ireland can build a better future in education, business large and small, medicine and other sectors.
My dear, late friend Walter Scott used to say to me, “if you aren’t willing to own a company for 25 years, don’t even think of owning it for 25 minutes”.
I think he stole the line from his good friend Warren Buffet, who once told me he has bought controlling shares in over 100 companies and sold none of them. Zero. This is what long-term capital is all about.
The truth is that this kind of investment model doesn’t just benefit investors like Buffet. It helps the people that use that company’s products and services. Because the focus is on quality and longevity, not short-term gains. This is how companies should be capitalised.
When I was on the board of the Kiewit Company, we bought a small energy company. Walter Scott, the CEO at the time, suggested we bring Warren Buffet in as a shareholder. We did. That was almost a quarter of a century ago. Since then, that ‘little’ middle American energy company has grown to over $20bn in revenue and has hired and trained 25,000 employees. It now has 12 million customers.
That’s long-term capital at work.
I wasn’t able to accomplish this at Enet, an Irish company I owned with Walter, because I waited too long to put long-term capital in place. And believe me: I heard it from Walter on more than one occasion.
Investors get a lot of negative press in this country and beyond. Sadly, much of it is justified. But we’d all do well to remember that there’s a pretty simple investment model that exists which benefits not only the investors but the people they serve.
Here’s to hoping long-term investment makes a comeback and that Eir’s owner’s comments are a sign of things to come.
David McCourt is founder and chairman of Granahan McCourt Capital and National Broadband Ireland.
Leave a comment