eircom could be hurt by Ireland government's move to end free voice services

eircom on Monday said it could be facing further trouble if Ireland's government decides to go ahead with plans to cut free phone service for elderly residents.

The government, according to a report in The Irish Times, is looking to reduce costs in its budget by cutting benefits to the elderly such as electricity, gas and telephone allowances.

A possible cut in the phone service program could have a large financial effect on eircom, which currently gets about 60 percent of the €100 million ($130.1 million) from the government.

"A significant cut to the telephone allowance would leave eircom with no alternative but to review the priorities in our business plan," an eircom spokesman said.

Although the telco reignited its leadership ranks by rehiring Herb Hribar as its new CEO, eircom has been weathering a tough economic storm of its own.

The once state-run telco said in November it plans to lay off about 2,000 employees over the next 18 months in an effort to cut €100 million ($130.1 million) in costs.

"The challenges facing eircom are significant," said Hribar in a statement announcing the cuts. "They require a fundamental transformation in the way we are organized, the business activities we prioritize and the work practices we have adopted in order to substantially reduce our costs and become more efficient."

Like other traditional wireline telcos, eircom is facing revenue challenges, largely due to the decline of traditional PSTN subscribers. In its full year results ended on June 30, 2012, eircom reported that revenue fell €1.515 billion ($1.98 billion), down €174 million ($227.6 million), or 10 percent, from 2011.

However, the telco is fighting back by building a foundation for next-gen consumer services with its Fiber to the X (FTTX) broadband initiative. As reported in its full year results ending on June 30, eircom said it added 50 new communities in Phase IV of the roll out of its fiber-based broadband plan, passing an additional 350,000 homes and businesses.

For more:
- The Irish Times has this article

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