Historical Cost Separated AccountsNetwork Cost Market Summary Notes to the Financial Statements 1....

Historical CostSeparated Accounts

for the Year ended 30th June 2013

Financial Statements

Contents

Page

2

5

6

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

25

Introduction

Statement of Responsibility for preparing the Separated Accounts

Report of the Independent Auditors to eircom Limited and ComRegConsolidated Income Statement

Consolidated Statement of Mean Capital Employed

Wholesale Access

- Income Statement - Statement of Mean Capital Employed - Wholesale Fixed Narrowband Access - Statement of average cost and revenue by service - Wholesale Unbundled Access - Statement of average cost and revenue by service - Wholesale Broadband Access - Statement of average cost and revenue by service - Wholesale Leased Lines - Statement of average cost and revenue by service Wholesale Other

- Income Statement - Statement of Mean Capital Employed - Wholesale Call Origination - Statement of average cost and revenue by service - Wholesale Call Termination - Statement of average cost and revenue by service Retail

- Income Statement - Statement of Mean Capital Employed Statement of Costs Network Cost Market Summary Notes to the Financial Statements

1. Comparative Figures and Methodology changes 27

2. Intra/Inter Business Turnover Reconciliation 29

3. Income Statement Reconciliation 30

4. Statement of Mean Capital Employed Reconciliation 31

Definitions of the Markets and Businesses 32

Appendix 1 Explanatory Reports 36

1

Introduction

eircom Historical Cost Separated Accounts

The European Communities (Electronic Communications Networks and Services) (Framework) Regulations 2011 (S.I. No. 333 of 2011), the European Communities (Electronic Communications Networks and Services) (Access) Regulations 2011 (S.I. No. 334 of 2011) and the European Communities (Electronic Communications Networks and Services) (Universal Service and Users‟ Rights) Regulations 2011 (S.I. No.337 of 2011) (respectively “the Framework Regulations”, “the Access Regulations” and the “Universal Service Regulations”) establish the framework for the regulation of the provision of electronic communications networks and services in Ireland. Under this framework, the Commission for Communications Regulation (“ComReg”) may designate operators as having Significant Market Power (“SMP”) in respect of specific markets, in which case ComReg may impose on such operators a range of obligations including, pursuant to Regulation 11 of the Access Regulations and Regulation 13 of the Universal Service Regulations, a requirement for accounting separation and cost accounting. eircom has been designated with SMP in a number of markets and in each case is subject to obligations of accounting separation and cost accounting.

The Historical Cost Separated Accounts for the year ended 30 June 2013 were prepared in accordance with this requirement and the detailed framework and financial statements requirements set out in the following ComReg Decision Notices (the 'Decision Notices‟):

Decisions No. 6, 8.1, 8.2, 8.4, 8.6, 8.9 and 8.11 set out in Decision Notice D7/01 'eircom‟s Reference Interconnection Offer & Accounting Separation and Publication of Financial Information for Telecommunications Operators‟, dated April 2001 D3/03 'Review of the Price Cap on certain Telecommunications Services‟, dated February 2003 D1/08 'eircom‟s cost of capital‟, dated May 2008

D03/09 'Review of regulatory asset lives of eircom Limited‟, dated August 2009 D04/09 'Rental Price for shared access to the Unbundled Local Loop Decision', dated August 2009 D08/10 'Accounting Separation and Cost Accounting Review of eircom Limited‟, dated 31 August 2010

The Financial Statements have been prepared in accordance with the framework and financial statement disclosure set out in these Decision Notices, insofar as they apply to the year ended 30 June 2013.

Financial Statements have to be prepared for the Market Groups and, where applicable, Individual Markets within these Market Groups:

Market Group Markets

Wholesale Access Wholesale Fixed Narrowband Access Wholesale Unbundled Access Wholesale Broadband Access Wholesale Leased Lines

Wholesale Other Wholesale Call Origination Wholesale Call Transit Wholesale Call Termination Wholesale Residual (Regulated) Wholesale Residual (Unregulated)

Retail & Other PSTN & ISDN Access Retail Other

The full definition of the Market Groups and individual markets are set out in the Definitions of the Markets and Businesses on page 32 to 35.

2

Introduction

The Historical Cost Regulatory Separated Accounts (“Separated Accounts”) are prepared in accordance with the Accounting Documents, where the Accounting Documents means the Primary and Secondary Accounting Documents, as appropriate. The Primary Accounting Documents set out the framework under which the statements have been prepared.

The Primary Accounting Documents are made up of the following: Regulatory Accounting Principles - which lay out the general rules by which the Separated Accounts should be prepared, for example that all balances should be attributed with reference to cost causality. Attribution Methods - which explain how revenue, costs including transfer charges, assets and liabilities are attributed to the Markets, Network Elements and Activities within those Market Groups, following the Regulatory Accounting Principles, on a fully allocated basis. Transfer Charges – which explain how charges are raised between the markets. Accounting Policies - which detail the accounting policies adopted in preparing the underlying financial information.

For clarification, the Primary Accounting Documents contain the high level principles of attribution.

The procedures describing how these principles are applied are contained in the Secondary Accounting Documents, which identify these procedures in detail. The Secondary Accounting Documents are provided privately to ComReg, in accordance with the requirements of D08/10.

This introduction does not form part of the Accounting Documents.

Applicable Rate of Return

The applicable Rate of Return used in these Separated Accounts is 10.21% (2012: 10.21%). The annual Rate of Return was mandated by ComReg in D1/08.

Basis of preparation of the Separated

Accounts

The structure of the Regulatory Separated Accounts required under the Decision Notices does not correspond to the way in which the group is organised and hence the way the statutory accounting records are structured. The Separated Accounts are therefore produced by overlaying the requirements of the Decision Notices on the statutory accounting record structure of eircom.

These Separated Accounts are prepared by attributing the balances in eircom‟s general ledgers and other accounting records (as amended by Directions published by ComReg) to the Markets and disaggregated Activities. As required by the Decision Notices, wherever possible, revenue, costs, assets and liabilities are directly associated with a Market or Network element using information recorded within eircom's accounting records and are directly attributed to that item. Where no such direct attribution is possible, the revenue, costs, assets and liabilities are apportioned between two or more Activities, Network Elements or Markets on a basis that reflects the causality of the revenue, cost, asset or liability. Residual costs for which no direct or indirect method of apportionment can be identified are allocated using an equal proportionate mark-up method. Details of this process are given in the Attribution Methods section within the Accounting Documents.

3

Introduction

Typically, in a fully allocated accounting system, a number of attribution methods are available. In selecting financial attribution methods and appropriate non-financial data for use within the attribution models employed in the production of the Separated Accounts, eircom has had to make certain estimates and exercise its judgement, having regard to the regulatory principles, including cost causality and objectivity, in order to comply with the requirements of the relevant directions.

Certain non-financial data used in the preparation of these Separated Accounts has been derived using sampling techniques appropriate to that data. eircom will continue to review and update attribution methods on an ongoing basis and, where deemed appropriate, will make necessary improvements.

The financial data included in these Separated Accounts are presented in thousands, and have been subject to rounding adjustments and, as a result, the totals of the data in this document may vary slightly from the information presented in this document or the actual arithmetic totals of such information.

4

Statement of Director’s Responsibilities for the Separated Accounts

The European Communities (Electronic Communications Networks and Services) (Framework) Regulations 2011 (S.I. No. 333 of 2011), the European Communities (Electronic Communications Networks and Services) (Access) Regulations 2011 (S.I. No. 334 of 2011) and the European Communities (Electronic Communications Networks and Services) (Universal Service and Users’ Rights) Regulations 2011 (S.I. No. 337 of 2011) (respectively “the Framework Regulations”, “the Access Regulations” and the “Universal Service Regulations”) establish the framework for the regulation of the provision of electronic communications networks and services in Ireland.

Under this framework, the Commission for Communications Regulation (“ComReg”) may designate operators as having Significant Market Power (“SMP”) in respect of specific markets, in which case ComReg may impose on such operators a range of obligations including, pursuant to Regulation 11 of the Access Regulations and Regulation 13 of the Universal Service Regulations, a requirement for accounting separation and cost accounting. eircom has been designated with SMP in a number of markets and in each case is subject to obligations of accounting separation and cost accounting. ComReg Decision D08/10 of 31 August 2010 specifies the manner in which eircom must meet its obligations of accounting separation and cost accounting. The directors are responsible for preparing the Historical Cost Separated Accounts which present fairly, in accordance with the Decision D08/10 and all relevant ComReg Directions, the results, mean capital employed and costs incurred by the company and for each of the relevant markets.

The Historical Cost Separated Accounts for the year ended 30 June 2013 were prepared in accordance with Decision Notice D08/10. Each financial statement includes:

an income statement; a statement of mean capital employed; a statement of costs (if applicable); and

a statement of costs of network services (if applicable)

Each Statement is prepared in accordance with the Accounting Documents published with these financial statements. Insofar as there is any inconsistency between any or all of the Accounting Documents, the company ensures that each financial statement is prepared in accordance with the Accounting Documents in the following order of priority:

the regulatory accounting principles; the attribution methods; the transfer charges; the accounting policies; and

Each financial statement is reconciled with the Annual Report and that reconciliation is demonstrated and explained.

eircom confirms that the Financial Statements for the year ended 30 June 2013 have been prepared in accordance with the requirements of the governing legislation

Richard Moat

Chief Financial Officer On Behalf of the Board 30 November 2013

5

Report of the Independent Auditors to eircom and ComReg

Report of the Independent Auditors to eircom Limited, (the

“Company”) and the Commission for Communications Regulation

(“ComReg”) issued in accordance with the Final Direction and

Decision “Accounting Separation and Cost Accounting Review of

eircom Limited” (“The Decision Instrument”) issued on 31 August

2010.

1. We have audited the Separated Accounts for the year ended 30June 2013 which comprise:

the Consolidated Income Statement and Consolidated Statement of Mean Capital Employed on pages 9 and 10; the Income Statements and Statements of Mean Capital Employed in respect of markets (the “Market Financial Statements”); the Statement of Average Costs and Revenues for Wholesale Fixed Narrowband Access, Wholesale Unbundled Access, Wholesale Broadband Access, Wholesale Leased Lines, Wholesale Call Origination, and Wholesale Call Termination, on pages 13 to 16 and pages 19 and 20; the Statement of Costs on page 23; the Network Cost Market Summary on page 25; and the Notes to the financial statements on pages 27 to 31.

2. The Market Financial Statements comprise the followingstatements for the year ended 30 June 2013:

The Wholesale Access Income Statement and Statement of Mean Capital Employed on pages 11 and 12, including the Income Statements for the Wholesale Access Markets; The Wholesale Other Income Statement and Statement of Mean Capital Employed on pages 17 and 18 including the Income Statements for the Wholesale Other Markets; and The Retail Income Statement and Statement of Mean Capital Employed on pages 21 and 22 including the Income

Statements for PSTN and ISDN Access, Meteor, Retail Other and Other Subsidiaries.

3. The Separated Accounts, which include the Market FinancialStatements, are prepared by the Company under the historical costconvention in accordance with:

Direction D08/10 (dated 31 August 2010), (“the Decision Instrument”), Decisions No. 6, 8.1, 8.2, 8.4, 8.6, 8.9 and 8.11 set out in D07/01 (dated April 2001), D03/03 (dated February 2003), D01/08 (dated May 2008), D03/09 (dated August 2009) and D04/09 (dated August 2009) (together “the Regulations”); the Primary Accounting Documents dated 30 November 2013.

Respective responsibilities of the Directors and auditors

4. As explained more fully in the Directors’ Responsibilities Statementset out on page 5, the Directors are responsible for preparing theSeparated Accounts which are fairly presented in accordance withthe Decision Instrument. Our responsibilities, as independentauditors, are established in Ireland by the Decision Instrument,International Standards on Auditing (UK and Ireland) and ourprofession’s ethical guidance.

5. Our responsibility is to audit the Separated Accounts in accordancewith relevant legal and regulatory requirements and InternationalStandards on Auditing (UK and Ireland) issued by the AuditingPractices Board. International Standards on Auditing (UK andIreland) require us to comply with the Auditing Practices BoardEthical Standards for Auditors. This report, including the opinion,has been prepared for and only for the Company and ComReg, inaccordance with the Decision Instrument, and for no otherpurpose. We do not, in giving this opinion, accept or assumeresponsibility for any other purpose or to any other person to whomthis report is shown or into whose hands it may come save where

6


expressly agreed by our prior consent in writing.

6. We report to you our opinion as to whether:the Separated Accounts as a whole are fairly presented in accordance with the Primary Accounting Documents and comply with the requirements of the Decision Instrument. each of the market financial statements as set out in Paragraph 2 above are fairly presented in accordance with the Primary Accounting Documents and comply with the requirements of the Decision Instrument.

7. In addition, we report if, in our opinion the Company has not keptproper accounting records, if we have not received all theinformation and explanations we consider necessary for our audit,or if information specified by the Decision Instrument is notdisclosed.

8. We read the other information presented with the SeparatedAccounts and consider the implications for our report if we becomeaware of any apparent misstatements or material inconsistencieswith the Separated Accounts. The other information comprises ofthe Introduction on pages 2 to 4, the Definitions of the Business onpages 32 to 35 and the Explanatory Reports on pages 36 to 50.

Basis of audit opinion

9. As explained in the “Basis of Preparation” on page 3 and 4, theCompany prepared the Separated Accounts by disaggregatingbalances recorded in the general ledgers and other accountingrecords of eircom Limited, as amended by Directions published byComReg] and its subsidiaries (the “Group”) maintained inaccordance with the Companies Acts, 1963 to 2012 and used, inaccordance with those Acts, for the preparation of the Company’sstatutory consolidated financial statements for the year ended 30

June 2013 (“the Statutory Financial Statements”).

10. PricewaterhouseCoopers audited the Statutory FinancialStatements for the year ended 30 June 2013 on which theyexpressed an unqualified audit opinion. In conducting oursubsequent examination of the Separated Accounts, and inproviding the opinions below, we have not performed anyadditional tests of the transactions and balances which arerecorded in the general ledgers and other accounting recordsbeyond those already performed for the purpose of the audit of theStatutory Financial Statements.

11. Having regard to the above:we conducted our audit of the Separated Accounts in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. Our work included examination on a test basis, of evidence relevant to the amounts and disclosures in the Separated Accounts. It also included an assessment of the significant estimates and judgements made by the directors in the preparation of the Separated Accounts. we planned and performed our audit of the Separated Accounts so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Market Financial Statements as a whole and each of the Market Income Statements are fairly presented in accordance with the Primary Accounting Documents and, on that basis, free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Separated Accounts.

7


Opinion

12. In our opinion:a) the Separated Accounts as a whole for the year ended 30

June 2013, fairly present in accordance with the PrimaryAccounting Documents dated 30 November 2013, theresults, mean capital employed and costs incurred by theCompany and comply with the requirements of the DecisionInstrument.

b) each of the Market Financial Statements for the year ended30 June 2013, fairly present in accordance with the PrimaryAccounting Documents dated 30 November 2013, theresults, mean capital employed and costs incurred by theCompany and comply with the requirements of the DecisionInstrument.

PricewaterhouseCoopers

Chartered Accountants and Registered Auditors

Dublin

30 November 2013

8

Consolidated

INCOME STATEMENT Restated Restated Restated Restated

For the year ended 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Whole

sale

Access

Whole

sale

Oth

er

Reta

il

Tota

l

Whole

sale

Access

Whole

sale

Oth

er

Reta

il

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Revenue 1,903,675 485,271 246,087 1,172,316 2,075,610 516,433 278,765 1,280,412

Operating costs 1,657,560 348,565 217,336 1,091,659 1,765,144 345,232 253,647 1,166,265

Return 246,114 136,706 28,752 80,657 310,466 171,201 25,118 114,147

Mean capital employed 1,722,474 1,208,184 142,293 371,997 1,675,805 1,196,453 189,186 290,166

Return on capital employed 14% 11% 20% 22% 19% 14% 13% 39%

9

Consolidated

STATEMENT OF MEAN CAPITAL EMPLOYED Restated Restated Restated

as at 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Whole

sale

Access

Whole

sale

Oth

er

Reta

il

Tota

l

Whole

sale

Access

Whole

sale

Oth

er

Reta

il

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Non Current Assets

Property, Plant and Equipment 1,535,255 1,188,283 139,984 206,988 1,523,148 1,164,796 157,593 200,760

Intangible Assets 194,622 14,460 1,627 178,535 114,638 14,542 2,961 97,135

Other 6,078 2,932 795 2,351 4,711 1,744 411 2,556

Total Non Current Assets 1,735,955 1,205,674 142,406 387,874 1,642,497 1,181,082 160,964 300,451

Current Assets

Inventories 12,883 4,451 794 7,638 12,893 3,541 1,287 8,065

Trade and other receivables 248,864 28,997 37,117 182,750 265,051 29,195 51,458 184,398 Cash and cash equivalents 363,067 130,845 53,102 179,121 423,464 125,743 83,505 214,216 Total Current Assets 624,815 164,292 91,013 369,509 701,408 158,478 136,251 406,679

Total Assets 2,360,769 1,369,967 233,419 757,383 2,343,905 1,339,561 297,215 707,130

Liabilities

Trade and other payables (553,869) (121,424) (79,453) (352,992) (586,600) (106,756) (96,569) (383,274)

Provisions for liabilities and charges (84,426) (40,359) (11,673) (32,394) (81,500) (36,352) (11,459) (33,690)

Total Liabilities (638,295) (161,783) (91,127) (385,386) (668,100) (143,108) (108,028) (416,964)

Mean Capital Employed for the year 1,722,473 1,208,184 142,293 371,997 1,675,805 1,196,453 189,186 290,166

10

Wholesale Access


For the year ended 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Whole

sale

Fix

ed

Narr

ow

band A

ccess

Whole

sale

Unbundle

d A

ccess

Whole

sale

Bro

adband A

ccess

Whole

sale

Leased

Lin

es

Tota

l

Whole

sale

Fix

ed

Narr

ow

band A

ccess

Whole

sale

Unbundle

d A

ccess

Whole

sale

Bro

adband A

ccess

Whole

sale

Leased

Lin

es

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Revenue

External revenue 127,568 69,602 3,319 27,300 27,347 133,593 70,819 4,350 27,813 30,611

Internal revenue - Inter 17,455 - 114 - 17,341 18,020 - - 7 18,013

Internal revenue - Intra 340,248 257,611 - 56,114 26,523 364,820 273,272 - 65,409 26,138

Total revenue 485,271 327,212 3,433 83,414 71,212 516,433 344,091 4,350 93,229 74,762

Costs

Cost of Sales 693 178 8 28 479 377 273 23 - 81

Product development and management 2,255 435 373 678 770 2,023 270 385 546 822

Marketing and sales 2,703 1,232 162 747 561 1,369 664 45 319 341

Repair and maintenance 69,351 55,386 484 7,209 6,271 78,351 63,807 470 7,648 6,427

Finance 4,722 3,017 77 949 679 5,299 3,580 86 899 734

Installation/Provisioning 22,197 16,569 1,145 3,309 1,174 22,216 16,865 1,102 3,124 1,125

Network support 46,108 29,909 478 9,749 5,972 41,417 29,089 645 6,129 5,555

General management 18,302 11,886 417 3,398 2,600 18,191 12,211 404 2,976 2,601

Accomodation 26,879 13,914 262 7,586 5,117 26,538 14,683 303 6,531 5,021

Information Technology 10,257 6,954 211 1,919 1,172 9,857 7,098 218 1,468 1,073

Transport 8,787 6,585 147 1,301 754 7,927 6,144 145 842 797

Personnel and administration 7,523 5,073 157 1,397 897 8,491 6,295 176 1,068 952

Other operating expenses 480 127 286 39 28 862 577 297 (7) (5)

Credit management and billing 521 220 92 176 33 498 213 37 124 124

Depreciation 128,000 68,983 887 33,018 25,112 121,675 69,604 873 28,025 23,171

Total HCA wholesale operating costs 348,777 220,468 5,185 71,503 51,620 345,093 231,374 5,210 59,691 48,818

Transfer charges from Wholesale - - - - - - - - - -

Exceptional (Gain) / Loss (212) (155) (3) (34) (20) 138 104 (1) 31 4

Total Operating costs 348,565 220,314 5,182 71,469 51,600 345,232 231,478 5,209 59,722 48,823

Return 136,706 106,898 (1,749) 11,945 19,612 171,201 112,613 (859) 33,507 25,939

Mean capital employed 1,208,184 813,807 6,551 214,079 173,747 1,196,453 849,028 6,143 174,414 166,868

Return on capital employed 11% 13% -27% 6% 11% 14% 13% -14% 19% 16%

11

Wholesale Access

STATEMENT OF MEAN CAPITAL EMPLOYED Restated Restated Restated Restated

as at 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Whole

sale

Fix

ed

Narr

ow

band

Access

Whole

sale

Unbundle

d

Access

Whole

sale

Bro

adband

Access

Whole

sale

Leased L

ines

Tota

l

Whole

sale

Fix

ed

Narr

ow

band

Access

Whole

sale

Unbundle

d

Access

Whole

sale

Bro

adband

Access

Whole

sale

Leased L

ines

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Non Current Assets

Property, Plant and Equipment 1,188,283 808,929 8,838 202,531 167,985 1,164,796 836,839 8,242 162,300 157,415

Intangible Assets 14,460 9,644 430 3,077 1,309 14,542 9,895 459 2,730 1,458

Other 2,932 1,190 9 1,149 584 1,744 725 5 750 265

Total Non Current Assets 1,205,674 819,762 9,277 206,757 169,878 1,181,082 847,459 8,706 165,780 159,138

Current Assets

Inventories 4,451 1,764 18 2,042 627 3,541 2,629 25 565 321

Trade and other receivables 28,997 14,330 (51) 4,051 10,666 29,195 9,510 475 4,559 14,650

Cash and cash equivalents 130,845 76,585 1,610 33,399 19,251 125,743 82,653 1,916 21,512 19,661

Total Current Assets 164,292 92,679 1,578 39,492 30,544 158,478 94,792 2,416 26,637 34,633

Total Assets 1,369,967 912,441 10,854 246,249 200,422 1,339,561 942,251 11,122 192,416 193,771

Liabilities

Trade and other payables (121,424) (67,886) (3,843) (26,498) (23,197) (106,756) (65,415) (4,546) (12,898) (23,897)

Provisions for liabilities and charges (40,359) (30,748) (460) (5,672) (3,478) (36,352) (27,808) (434) (5,105) (3,006)

Total Liabilities (161,783) (98,634) (4,303) (32,170) (26,675) (143,108) (93,223) (4,980) (18,002) (26,903)

Mean Capital Employed for the year 1,208,184 813,807 6,551 214,079 173,747 1,196,453 849,028 6,143 174,414 166,868

12

Wholesale AccessWholesale Fixed Narrowband Access

Note 1: Statement of average cost and revenue by service NOTE SUBJECT TO FURTHER WORK

For the year ended 30 June 2013

Market summary

External

revenue

Internal

revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2013 69,602 257,611 327,212 220,314 106,898 32.67% 813,807 13.14%

Service External

revenue

Internal

revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

PSTN SB-WLR Rental 61,395 213,794 275,189 1,272 Lines 18.03 16.19 111% 275,189

ISDN BRA SB-WLR Rentals 4,061 21,019 25,081 72 Lines 29.11 17.57 166% 25,080

ISDN PRA/FRA SB-WLR Rentals 3,412 20,617 24,030 8 Lines 250.63 139.37 180% 24,029

PSTN & ISDN SB-WLR Connections 733 2,181 2,913 124 Connections 23.40 223.34 10% 2,914

External

revenue

Internal

revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2012 Restated 70,819 273,272 344,091 231,478 112,613 32.73% 849,028 13.26%

Service External

revenue

Internal

revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

PSTN SB-WLR Rental 61,607 227,281 288,888 1,344 Lines 17.92 16.06 112%

ISDN BRA SB-WLR Rentals 4,682 21,981 26,663 76 Lines 29.15 17.28 169%

ISDN PRA/FRA SB-WLR Rentals 3,697 21,391 25,088 8 Lines 253.47 143.09 177%

PSTN & ISDN SB-WLR Connections 832 2,620 3,452 116 Connections 29.86 253.02 12%

Average Rental revenue and costs are monthly averages

Rental volumes are average volumes

13

Wholesale AccessWholesale Unbundled Access NOTE SUBJECT TO FURTHER WORK

Note 1: Statement of average cost and revenue by service


Market summary

External

revenue

Internal

revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2013 3,319 114 3,433 5,182 (1,749) (50.95%) 6,551 (26.70%)

Service External

revenue

Internal

revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

LLU Rental 1,869 - 1,869 15 Lines 10.63 15.56 68% 1,869 -

Line Share Rental 471 - 471 51 Lines 0.78 0.99 78% 471 -

LLU & Line Share Connections 988 - 988 35 Connections 27.96 55.99 50%

Physical Co-location (9) 114 104 n.m (9) 113

External

revenue

Internal

revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2012 4,350 - 4,350 5,209 (859) (19.75%) 6,143 (13.98%)

Service External

revenue

Internal

revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

LLU Rental 2,020 - 2,020 14 Lines 12.38 14.48 86%

Line Share Rental 446 - 446 46 Lines 0.81 0.93 87%

LLU & Line Share Connections 790 - 790 23 Connections 34.19 93.79 36%

Physical Co-location 1,094 - 1,094 n.m



n.m = not measurable

14

Wholesale Access NOTE SUBJECT TO FURTHER WORK

Wholesale Broadband Access



Market summary

External revenue Internal

revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2013 27,300 56,114 83,414 71,469 11,945 14.32% 214,079 5.58%

Service External revenue Internal

revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

Bitstream Rental 15,199 23,528 38,727 252 Lines 12.79 7.72 166%

WBA Connections 611 579 1,191 138 Connections 8.60 36.33 24% 1,190 1

WSL NGA Connections, Rental & Traffic 208 607 815

Bitstream MB Rental 5,766 17,628 23,394 405 Lines 4.81 3.59 134%

Bitstream MB Usage 5,516 13,771 19,287 405 Lines 3.96 5.35 74%


revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2012 Restated 27,813 65,416 93,229 59,722 33,507 35.94% 174,414 19.21%


revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

Bitstream Rental 17,029 29,126 46,155 310 Lines 12.42 8.41 148%

WBA Connections 792 1,046 1,838 140 Connections 13.13 49.77 26%

Bitstream MB Rental 4,327 16,999 21,326 364 Lines 4.89 4.16 117%

Bitstream MB Usage 5,665 18,244 23,909 364 Lines 5.48 4.85 113%



15

Wholesale AccessWholesale Leased Lines



Market summary


revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2013 27,347 43,864 71,212 51,600 19,612 27.54% 173,747 11.29%


revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

EXT INT VOLUMES

Wholesale Ethernet Rental 5,506 17,225 22,730 - n.m - - - 22,731 (1) 24% 57% 48%

Wholesale LL Rental <155Mb 5,717 7,912 13,629 4.095 Circuits 277 199 139% 9,782 13,629 - -26% -23% -24% -17%

Wholesale LL Rental >=155 Mb 1,231 4,040 5,271 0.030 Circuits 14,688 10,328 142% 3,706 5,271 - -13% -27% -24% -28%

Wholesale LL and Ethernet connections 750 1,350 2,101 1.357 Connections 1,548 1,393 111% 2,100 1 -30% -7% -16% 15%

PPC EULs Rental < 155MB 13,453 6,726 20,179 5.759 Circuits 292 179 164% 20,179 - -12% -14% -13% -13%

PPC EULs Rental >= 155MB 690 6,612 7,303 0.228 Circuits 2,673 1,665 161% 4,547 7,302 1 -1% -18% -16% -14%


revenue

Total

revenue

Total

operating

costs

Return Return on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2012 Restated 30,611 44,151 74,762 48,823 25,939 34.70% 166,868 15.54%


revenue

Total

revenue Volume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 000's € €

Wholesale Ethernet Rental 4,429 10,979 15,408 n.m

Wholesale LL Rental <155Mb 7,689 10,286 17,975 4.920 Circuits 304 200 152% 11,806

Wholesale LL Rental >=155 Mb 1,418 5,552 6,970 0.041 Circuits 14,020 8,483 165% 4,217

Wholesale LL and Ethernet connections 1,065 1,451 2,516 1.175 Connections 2,141 1,445 148%

PPC Rental < 155MB 15,316 7,859 23,175 6.598 Circuits 293 187 157%

PPC Rental >= 155MB 694 8,024 8,718 0.266 Circuits 2,731 1,745 157% 5,569

Average Circuit revenue and costs are monthly averages

Cicruit volumes are average volumes

n.m = not measurable

16

Wholesale Other


for the year ended 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Whole

sale

Call

Origin

ation

Whole

sale

Call

Tra

nsit

Whole

sale

Call

Term

ination

Whole

sale

Resid

ual

(Regula

ted)

Whole

sale

Resid

ual

(Unre

gula

ted)

Tota

l

Whole

sale

Call

Origin

ation

Whole

sale

Call

Tra

nsit

Whole

sale

Call

Term

ination

Whole

sale

Resid

ual

(Regula

ted)

Whole

sale

Resid

ual

(Unre

gula

ted)

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Revenue

External revenue 130,425 4,132 32,725 8,697 24,665 60,206 139,274 5,180 31,962 9,482 27,636 65,013

Internal revenue - Inter 25,145 - 8,469 885 3,568 12,223 24,751 - 6,534 878 3,210 14,129

Internal revenue - Intra 90,518 11,818 48,847 7,277 5,059 17,516 114,741 14,025 65,438 9,514 6,856 18,908

Total revenue 246,087 15,950 90,041 16,859 33,293 89,946 278,765 19,205 103,934 19,874 37,702 98,050

Costs

Cost of Sales 98,230 - 82,760 - (137) 15,607 120,213 - 95,872 - 238 24,103

Product Development and management 1,464 107 37 115 317 888 5,872 117 39 121 280 5,315

Marketing and Sales 1,867 36 - 93 184 1,554 742 26 - 53 239 424

Repair and maintenance 9,123 2,490 1,299 2,578 927 1,829 10,946 2,559 1,103 2,568 1,008 3,707

Finance 873 180 100 189 95 309 1,265 230 120 233 118 564

Installation/Provisioning 1,145 2 16 2 332 793 1,095 5 36 6 399 649

Network support 6,638 1,561 905 1,629 695 1,847 9,094 1,625 1,151 1,644 728 3,946

General management 4,251 652 343 700 512 2,043 6,146 814 387 829 601 3,516

Accomodation 8,837 2,596 1,179 2,724 920 1,419 9,409 2,736 1,213 2,775 816 1,868

Information Technology 1,582 301 149 312 240 581 2,112 377 214 377 247 897

Transport 673 92 46 100 135 300 1,173 179 116 181 147 551

Personnel and administration 1,109 166 97 175 148 523 1,669 223 157 225 197 868

Other operating expenses 3,375 7 4 7 3 3,354 2,948 (3) (1) (3) 2 2,953

Credit management and billing 785 4 9 5 55 712 1,546 264 70 260 42 910

Depreciation 22,169 5,401 3,454 5,637 2,037 5,641 23,745 5,775 3,411 5,842 2,308 6,408

Total HCA wholesale operating costs 162,120 13,595 90,397 14,265 6,464 37,398 197,972 14,926 103,888 15,110 7,370 56,679

Transfer charges from Wholesale / Revenue transfer to Retail 55,235 - 424 - 16,386 38,425 55,650 - 405 - 17,797 37,447

Exceptional (Gain) / Loss (19) (4) (2) (4) (4) (6) 25 11 (1) 11 - 4

Total Operating costs 217,336 13,592 90,819 14,261 22,846 75,817 253,647 14,937 104,293 15,121 25,167 94,130

Return 28,752 2,358 (779) 2,597 10,446 14,129 25,118 4,268 (358) 4,753 12,535 3,920

Mean capital employed 142,293 35,962 42,355 38,421 20,413 5,142 189,186 41,658 53,104 42,992 21,516 29,916

Return on capital employed 20% 7% -2% 7% 51% 275% 13% 10% -1% 11% 58% 13%

17

Wholesale Other

STATEMENT OF MEAN CAPITAL EMPLOYED Restated Restated Restated

as at 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

To

tal

Wh

ole

sa

le C

all

Ori

gin

atio

n

Wh

ole

sa

le C

all

Tra

nsit

Wh

ole

sa

le C

all

Te

rmin

atio

n

Wh

ole

sa

le

Re

sid

ua

l

(Re

gu

late

d)

Wh

ole

sa

le

Re

sid

ua

l

(Un

reg

ula

ted

)

To

tal

Wh

ole

sa

le C

all

Ori

gin

atio

n

Wh

ole

sa

le C

all

Tra

nsit

Wh

ole

sa

le C

all

Te

rmin

atio

n

Wh

ole

sa

le

Re

sid

ua

l

(Re

gu

late

d)

Wh

ole

sa

le

Re

sid

ua

l

(Un

reg

ula

ted

)

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Non Current Assets

Property, Plant and Equipment 139,984 34,991 23,701 36,629 18,122 26,541 157,593 38,819 27,376 39,346 17,601 34,451

Intangible Assets 1,627 246 138 258 348 638 2,961 287 195 290 635 1,554

Other 795 247 135 257 74 82 411 137 41 139 40 53

Total Non Current Assets 142,406 35,484 23,973 37,143 18,544 27,261 160,964 39,243 27,612 39,775 18,276 36,058

Current Assets

Inventories 794 224 182 239 100 49 1,287 107 50 108 30 993

Trade and other receivables 37,117 1,044 8,479 2,163 3,268 22,163 51,458 1,496 9,321 2,462 4,403 33,776

Cash and cash equivalents 53,102 3,061 30,420 3,222 2,231 14,167 83,505 4,606 42,283 4,667 3,157 28,791

Total Current Assets 91,013 4,330 39,081 5,624 5,599 36,380 136,251 6,209 51,654 7,237 7,589 63,560

Total Assets 233,419 39,814 63,054 42,767 24,143 63,641 297,215 45,452 79,266 47,013 25,865 99,618

Liabilities

Trade and other payables (79,453) (2,592) (20,072) (3,036) (3,258) (50,495) (96,569) (2,621) (25,596) (2,838) (3,850) (61,663)

Provisions for liabilities and charges (11,673) (1,259) (627) (1,310) (472) (8,005) (11,459) (1,174) (566) (1,183) (499) (8,039)

Total Liabilities (91,127) (3,852) (20,699) (4,346) (3,730) (58,500) (108,028) (3,795) (26,162) (4,021) (4,349) (69,702)

Mean Capital Employed for the year 142,293 35,962 42,355 38,421 20,413 5,141 189,186 41,658 53,104 42,992 21,516 29,916

18

Wholesale OtherWholesale Call Origination



Market summary

External revenueInternal

revenue

Total

revenue

Total

operating

costs

ReturnReturn on

Turnover

Mean capital

employedROCE

€'000 €'000 €'000 €'000 €'000 €'000

2013 4,132 11,818 15,950 13,592 2,358 14.78% 35,962 6.56%

Service External revenueInternal

revenue

Total

revenueVolume Unit

Average

revenue

FAC average

cost

Average

revenue /

cost

€'000 €'000 €'000 Millions € €

Fixed Origination - Minutes 2,123 6,034 8,157 4,320 Minutes 1.89 3.04 62% 8,157

Fixed Origination - Calls 2,009 5,784 7,793 1,368 Calls 5.70 3.03 188% 7,793 -

4,132 11,818 15,950

(0) 0 0

External revenueInternal

revenue

Total

revenue

Total

operating

costs

ReturnReturn on

Turnover

Mean capital

employedROCE

€'000 €'000 €'000 €'000 €'000 €'000

2012 5,180 14,025 19,205 14,937 4,268 22.22% 41,658 10.25%

Service External revenueInternal

revenue

Total

revenueVolume Unit

Average

revenue

FAC average

cost

Average

revenue /

cost

€'000 €'000 €'000 Millions € €

Fixed Origination - Minutes 2,712 7,299 10,011 4,967 Minutes 2.02 2.52 80%

Fixed Origination - Calls 2,468 6,726 9,194 1,569 Calls 5.86 4.20 140%

19

Wholesale OtherWholesale Call Termination



Market summary

External

revenue

Internal

revenue

Total

revenue

Total

operating

costs

ReturnReturn on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2013 8,697 8,162 16,859 14,261 2,597 15.40% 38,421 6.76%

ServiceExternal

revenue

Internal

revenue

Total

revenueVolume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 Millions € €

Fixed termination - Minutes 4,325 4,664 8,989 4,589 Minutes 1.96 3.06 64% 8,989 -

Fixed termination - Calls 4,371 3,498 7,869 1,366 Calls 5.76 3.03 190% 7,869 -

External

revenue

Internal

revenue

Total

revenue

Total

operating

costs

ReturnReturn on

Turnover

Mean

capital

employed

ROCE

€'000 €'000 €'000 €'000 €'000 €'000

2012 9,482 10,392 19,874 15,121 4,753 23.92% 42,992 11.06%

ServiceExternal

revenue

Internal

revenue

Total

revenueVolume Unit

Average

revenue

FAC

average

cost

Average

revenue /

cost

€'000 €'000 €'000 Millions € €

Fixed termination - Minutes 4,727 6,007 10,733 5,105 Minutes 2.10 2.53 83%

Fixed termination - Calls 4,756 4,385 9,140 1,533 Calls 5.96 4.25 140%

20

Retail

INCOME STATEMENT Restated Restated

For the year ended 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Reta

il

Adju

stm

ents

PS

TN

&

ISD

N

Access

Mete

or

Reta

il O

ther

Oth

er

Subsid

iaires

Tota

l

Reta

il

Adju

stm

ents

PS

TN

&

ISD

N

Access

Mete

or

Reta

il O

ther

Oth

er

Subsid

iaires

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Revenue

External revenue 1,135,834 - 270,678 340,362 438,337 86,457 1,242,556 - 300,526 358,870 503,608 79,552

Internal revenue - Inter 21,166 (16,078) 244 12,793 10,296 13,912 21,357 (17,282) 262 13,344 15,733 9,300

Internal revenue - Intra 15,316 - - - 15,316 - 16,499 - - - 16,499 -

Total revenue 1,172,316 (16,078) 270,922 353,155 463,950 100,368 1,280,412 (17,282) 300,788 372,214 535,840 88,852

Retail Costs

Cost of Sales 42,524 (19) 270 - 42,273 - 45,236 (341) 304 - 45,273 -

Product Development and management 12,757 - 1,366 - 11,391 - 14,187 - 1,638 - 12,549 -

Marketing and Sales 65,215 - 20,084 - 45,131 - 63,057 - 18,521 - 44,536 -

Repair and maintenance 9,294 - 1,369 - 7,925 - 10,213 - 1,484 - 8,729 -

Finance 3,988 - 956 - 3,032 - 4,768 - 1,080 - 3,688 -

Installation/Provisioning 3,647 - 69 - 3,578 - 2,921 - 85 - 2,836 -

Network support 3,095 - 78 - 3,017 - 2,887 - 76 - 2,811 -

General management 11,617 - 2,403 - 9,214 - 13,029 - 2,532 - 10,497 -

Accomodation 22,863 (4,802) 1,958 - 25,707 - 25,390 (18) 2,098 - 23,310 -

Information Technology 10,396 - 1,252 - 9,143 - 9,869 - 1,137 - 8,732 -

Transport 2,521 - 475 - 2,046 - 2,529 - 374 - 2,155 -

Personnel and administration 5,282 - 733 - 4,549 - 5,658 - 912 - 4,746 -

Other operating expenses 11,846 (352) 27 - 12,172 - 10,636 (609) (2) - 11,248 -

Credit management and billing 18,572 - 11,504 - 7,068 - 24,332 - 13,172 - 11,160 -

Depreciation 21,590 - 2,717 - 18,874 - 18,896 - 2,223 - 16,673 -

Group/Meteor Operating costs 455,518 (10,904) - 381,962 - 84,461 470,842 (16,314) - 412,849 - 74,307

Total HCA retail operating costs 700,726 (16,078) 45,258 381,962 205,123 84,461 724,451 (17,282) 45,634 412,849 208,943 74,307

Transfer charges from Wholesale 390,846 - 234,528 - 156,318 - 440,413 - 256,921 - 183,492 -

Exceptional (Gain) / Loss 87 - (12) 194 (97) 1 1,401 - (13) 829 (59) 644

Total Operating costs 1,091,659 (16,078) 279,775 382,156 361,344 84,462 1,166,265 (17,282) 302,542 413,678 392,376 74,951

Return 80,657 - (8,853) (29,002) 102,606 15,906 114,147 - (1,754) (41,464) 143,464 13,901

Mean capital employed 371,997 - 18,749 (770) 247,797 106,221 290,166 - 16,420 41,442 112,541 119,763

Return on capital employed 22% 0% -47% N/a 41% 15% 39% 0% -11% N/a 127% 12%

21

Retail

STATEMENT OF MEAN CAPITAL EMPLOYED

as at 30 June 2013 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-12

Tota

l

Reta

il

Adju

stm

ents

PS

TN

&

ISD

N A

ccess

Mete

or

Reta

il O

ther

Oth

er

Subsid

iaires

Tota

l

Reta

il

Adju

stm

ents

PS

TN

&

ISD

N A

ccess

Mete

or

Reta

il O

ther

Oth

er

Subsid

iaires

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Non Current Assets

Property, Plant and Equipment 206,988 - 9,858 62,119 94,105 40,907 200,760 - 8,580 65,224 78,795 48,161

Intangible Assets 178,535 - 3,741 145,865 26,809 2,121 97,135 - 2,552 77,501 13,205 3,877

Other 2,351 - 82 984 290 995 2,556 (50) 47 1,184 166 1,209

Total Non Current Assets 387,874 - 13,680 208,968 121,204 44,023 300,451 (50) 11,179 143,909 92,166 53,247

Current Assets

Inventories 7,638 - - 2,118 4,525 995 8,065 - 5 2,566 3,635 1,859

Trade and other receivables 182,750 (379,718) 30,641 71,378 254,788 205,661 184,398 (187,752) 32,877 74,275 145,555 119,443

Cash and cash equivalents 179,121 - 14,607 21,121 83,665 59,727 214,216 - 17,839 42,027 95,253 59,097

Total Current Assets 369,509 (379,718) 45,248 94,618 342,978 266,383 406,679 (187,752) 50,721 118,868 244,443 180,399

Total Assets 757,383 (379,718) 58,928 303,586 464,182 310,405 707,130 (187,802) 61,900 262,777 336,609 233,646

Liabilities

Trade and other payables (352,992) 379,718 (38,685) (288,965) (204,500) (200,561) (383,274) 187,802 (44,845) (205,495) (210,485) (110,251)

Provisions for liabilities and charges (32,394) - (1,494) (15,392) (11,884) (3,624) (33,690) - (635) (15,840) (13,583) (3,632)

Total Liabilities (385,386) 379,718 (40,179) (304,357) (216,385) (204,185) (416,964) 187,802 (45,480) (221,335) (224,068) (113,883)

Mean Capital Employed for the year 371,997 - 18,749 (770) 247,797 106,221 290,166 - 16,420 41,442 112,541 119,763

22

Statement of Costs For the year ended 30 June 2013

Full allocated Cost (€'000) Opera

ting c

osts

Exceptional O

pera

ting

Costs

Mean c

apital

em

plo

yed

Applic

able

rate

of

retu

rn o

n c

apital %

Capital costs

Tota

l of opera

ting

costs

and c

apital costs

rela

ting to c

urr

ent year

Volu

me

Avera

ge c

osts

per

unit

rela

ting to c

urr

ent year

Copper Access Network* 154,866 (106) 720,223 10.21% 73,535 228,295 1,377,608 165.72

Fibre/High Speed Access Network 6,593 (10) 40,515 10.21% 4,135 10,720 7,219 1,484.90

NGA 14,926 (15) 56,658 10.21% 5,786 20,696 (a) (a)

DSL Equipment 18,510 (4) 49,290 10.21% 5,033 23,539 (a) (a)

Other Access Equipment 3,661 - 10,367 10.21% 1,058 4,719 (a) (a)

Provisioning 35,589 (36) 18,839 10.21% 1,923 37,476 (a) (a)

Repair 20,175 (17) 6,397 10.21% 653 20,811 (a) (a)

Line Sensitive

Subscriber Unit 17,851 (5) 53,268 10.21% 5,439 23,285 1,351,505 17.23

Call Sensitive

Subscriber unit 2,926 (1) 8,763 10.21% 895 3,820 2,875,584 0.133

Parent switch 4,473 (1) 8,447 10.21% 862 5,333 3,377,704 0.158

Gateway switch 756 - 3,111 10.21% 318 1,073 1,133,494 0.095

Traffic sensitive

Subscriber unit 3,369 (1) 9,472 10.21% 967 4,335 9,045,564 0.048

Parent switch 3,963 (1) 7,378 10.21% 753 4,715 10,203,228 0.046

Gateway switch 869 - 4,054 10.21% 414 1,283 3,518,249 0.036

Interconnect Equipment 280 - (417) 10.21% (43) 238 (a) (a)

Intelligent Network 2,207 - 1,431 10.21% 146 2,353 2,753,264 0.855

Other Switching Elements 498 - 575 10.21% 59 557

Transmission network

Transmission: Non-length dependent

PSTN: RSU to parent link 9,835 (3) 25,233 10.21% 2,576 12,409 6,758,228 0.184

PSTN: Parent to parent link 1,453 - 3,961 10.21% 404 1,857 2,494,073 0.074

PSTN: Parent to gateway link 904 - 2,522 10.21% 257 1,161 2,697,334 0.043

Interconnect link 1,386 - 3,980 10.21% 406 1,792 (a) (a)

Data incl leased Lines link 8,544 (3) 22,932 10.21% 2,341 10,882 (a) (a)

DSL transmission link 8,899 (3) 22,204 10.21% 2,267 11,163 (a) (a)

Other data link 2,514 (1) 6,802 10.21% 694 3,207 (a) (a)

NGN link 20,776 (5) 66,877 10.21% 6,828 27,599 (a) (a)

Other transmission link 3,804 (1) 10,650 10.21% 1,087 4,889 (a) (a)

Transmission: Length dependent

PSTN: RSU to parent length 1,723 - 12,662 10.21% 1,293 3,015 2,199,642 0.137

PSTN: Parent to parent length 411 - 2,535 10.21% 259 670 1,338,173 0.050

PSTN: Parent to gateway length 361 - 2,118 10.21% 216 577 3,134,008 0.018

Interconnect Length 186 - 992 10.21% 101 287 (a) (a)

Data incl leased Lines length 3,163 (1) 19,526 10.21% 1,994 5,156 (a) (a)

DSL transmission length 2,370 (1) 18,347 10.21% 1,873 4,243 (a) (a)

Other data length 4,205 (1) 23,883 10.21% 2,438 6,642 (a) (a)

NGN length 5,417 (1) 32,889 10.21% 3,358 8,775 (a) (a)

Other transmission length 380 - 1,871 10.21% 191 571 (a) (a)

Data platforms

Legacy Leased Lines 7,162 (2) 19,380 10.21% 1,979 9,139 (a) (a)

Other Data 12,320 (2) 21,025 10.21% 2,147 14,465 (a) (a)

Outpayments 99,173 - 16,969 10.21% 1,733 100,905 (a) (a)

Carrier Administration 15,046 (3) 948 10.21% 97 15,140 (a) (a)

Carrier billing 2,514 (1) 35,205 10.21% 3,594 6,108 (a) (a)

Other SMP elements 1,157 - 3,253 10.21% 332 1,490 (a) (a)

Non-SMP elements 5,867 (3) (24,684) 10.21% (2,520) 3,344 (a) (a)

Total 511,082 (228) 1,350,452 10.21% 137,880 648,735

(a) These components include a number of different elements which are used in different proportions for the delivery of services

within this heading

(b) Unit of length is 100km

('c) Included above are certain network costs that are directly allocated to Retail markets.

23

Statement of Costs For the year ended 30 June 2012

Full allocated Cost (€'000) Op

era

tin

g c

osts

Exce

ptio

na

l O

pe

ratin

g

Co

sts

Me

an

ca

pita

l e

mp

loye

d

Ap

plic

ab

le r

ate

of re

turn

on

ca

pita

l %

Ca

pita

l co

sts

To

tal o

f o

pe

ratin

g c

osts

an

d c

ap

ita

l co

sts

rela

tin

g to

cu

rre

nt ye

ar

Vo

lum

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Ave

rag

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pe

r u

nit

rela

tin

g to

cu

rre

nt ye

ar

Copper Access Network* 158,802 63 748,504 10.21% 76,422 235,287 1,456,751 161.52

Fibre/High Speed Access Network 5,765 (2) 33,774 10.21% 3,446 9,211 6,957 1,324.04

NGA 3,580 (2) 12,469 10.21% 1,273 4,851 (a) (a)

DSL Equipment 20,913 22 61,261 10.21% 6,255 27,190 (a) (a)

Other Access Equipment 5,050 (1) 12,998 10.21% 1,327 6,376 (a) (a)

Provisioning 39,336 (8) 25,012 10.21% 2,554 41,882 (a) (a)

Repair 25,983 - 11,037 10.21% 1,127 27,110 (a) (a)

Line Sensitive

Subscriber Unit 19,532 48 62,307 10.21% 6,362 25,941 1,427,800 18.17

Call Sensitive

Subscriber unit 3,199 8 10,239 10.21% 1,045 4,252 3,271,993 0.130

Parent switch 4,477 1 10,624 10.21% 1,085 5,562 3,698,079 0.150

Gateway switch 1,185 - 5,357 10.21% 547 1,731 1,282,964 0.135

Traffic sensitive

Subscriber unit 3,719 10 11,280 10.21% 1,152 4,881 10,236,450 0.048

Parent switch 3,939 1 8,852 10.21% 904 4,844 11,173,830 0.043

Gateway switch 1,353 (1) 6,690 10.21% 683 2,035 4,021,474 0.051

Interconnect Equipment 287 - (342) 10.21% (35) 253 (a) (a)

Intelligent Network 2,576 (1) 1,694 10.21% 173 2,748 3,079,852 0.892

Other Switching Elements 655 - 722 10.21% 74 729



PSTN: RSU to parent link 10,171 4 28,416 10.21% 2,901 13,077 7,629,502 0.171

PSTN: Parent to parent link 1,457 - 4,257 10.21% 435 1,892 2,661,397 0.071

PSTN: Parent to gateway link 962 - 2,868 10.21% 293 1,255 2,998,638 0.042

Interconnect link 1,425 - 4,327 10.21% 442 1,867 (a) (a)

Data incl leased Lines link 9,735 3 28,163 10.21% 2,875 12,613 (a) (a)

DSL transmission link 9,796 5 26,941 10.21% 2,751 12,552 (a) (a)

Other data link 2,825 1 8,222 10.21% 839 3,665 (a) (a)

NGN link 13,471 5 49,903 10.21% 5,095 18,571 (a) (a)

Other transmission link 4,092 1 12,185 10.21% 1,244 5,336 (a) (a)


PSTN: RSU to parent length 1,331 - 11,515 10.21% 1,176 2,506 2,473,745 0.101

PSTN: Parent to parent length 297 - 1,953 10.21% 199 496 1,450,260 0.034

PSTN: Parent to gateway length 352 - 2,073 10.21% 212 564 3,493,960 0.016

Interconnect Length 224 - 1,190 10.21% 121 345 (a) (a)

Data incl leased Lines length 3,554 - 22,685 10.21% 2,316 5,870 (a) (a)

DSL transmission length 1,453 - 14,792 10.21% 1,510 2,964 (a) (a)

Other data length 4,257 - 25,177 10.21% 2,571 6,828 (a) (a)

NGN length 4,387 - 28,603 10.21% 2,920 7,307 (a) (a)

Other transmission length 438 - 2,253 10.21% 230 668 (a) (a)

Data platforms

Legacy Leased Lines 7,667 5 22,825 10.21% 2,330 10,002 (a) (a)

Other Data 13,786 (2) 23,121 10.21% 2,361 16,145 (a) (a)

Outpayments 120,618 - 28,978 10.21% 2,959 123,576 (a) (a)

Carrier Administration 15,355 (4) (18,369) 10.21% (1,875) 13,476 (a) (a)

Carrier billing 5,466 (1) 46,870 10.21% 4,785 10,251 (a) (a)

Other SMP elements 1,053 - 2,080 10.21% 212 1,266 (a) (a)

Non-SMP elements 8,586 9 (23,447) 10.21% (2,394) 6,201 (a) (a)

Total 543,111 162 1,380,068 10.21% 140,905 684,178

(a) These components include a number of different elements which are used in different proportions for the delivery of services

within this heading

(b) Unit of length is 100km

('c) Included above are certain network costs that are directly allocated to Retail markets.

24

Network Cost Market Summary For the year ended 30 June 2013

Full allocated Cost (€'000) To

tal O

pe

ratin

g a

nd

Ca

pita

l

Co

sts

Wh

ole

sa

le F

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Acce

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Wh

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sa

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d A

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ss

Wh

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sa

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ea

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d L

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s

Wh

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an

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ss

Wh

ole

sa

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all

Te

rmin

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n

Wh

ole

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all

Orig

ina

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Wh

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all

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Wh

ole

sa

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ua

l

(Re

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late

d)

Wh

ole

sa

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ua

l

(Un

reg

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)

Re

tail

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sid

ua

l

Copper access network 228,295 223,028 2,313 2,713 231 - - - - 9 -

Fibre/High Speed Access Network 10,720 1,061 - 7,274 - - - - 2,254 131 -

NGA 20,696 - - - 20,696 - - - - - -

DSL equipment 23,539 - - - 23,538 - - - - - 1

Other access equipment 4,719 1,852 - 2,861 - - - - - 8 (1)

Provisioning wholesale networks 37,476 27,712 2,096 1,738 4,989 - - - 634 294 12

Repair wholesale networks 20,811 14,794 63 1,218 4,065 35 33 20 419 160 5

Line Sensitive

Subscriber unit - line sensitive 23,285 23,285 - - - - - - - - -

Call Sensitive

Subscriber unit - call sensitive 3,820 - - - - 1,909 1,911 - - - 1

Parent switch - call sensitive 5,333 - - - - 2,120 2,122 1,093 - - (2)

Gateway switch - call sensitive 1,073 - - - - - - 1,074 - - (1)

Traffic sensitive

Subscriber unit - traffic sensitive 4,335 - - - - 2,232 2,103 - - - -

Parent switch - traffic sensitive 4,715 - - - - 1,995 1,870 850 - - -

Gateway switch - traffic sensitive 1,283 - - - - - - 1,283 - - -

Interconnect equipment 238 - - - - - - (38) 276 - -

Intelligent Network 2,353 - - - - 858 859 635 - - -

Other switching elements 557 - - - - - - 173 384 - 1



PSTN: RSU to parent link 12,409 - - - - 6,389 6,019 - - - 2

PSTN: Parent to parent link 1,857 - - - - - - 1,857 - - -

PSTN: Parent to gateway link 1,161 - - - - - - 1,161 - - -

Interconnect link 1,792 - - - - - - - 1,792 - -

Data incl leased lines link 10,882 325 - 10,096 - 54 54 - - 351 2

DSL transmission link 11,163 - - - 11,163 - - - - - -

Other data link 3,207 - - 2,014 1,005 - - - 12 176 (1)

NGN Link 27,599 - - 16,736 10,863 - - - - - -

Other transmission link 4,889 3,772 - 297 2 - - 232 61 526 (1)


PSTN: RSU to parent length 3,015 - - - - 1,552 1,463 - - - -

PSTN: Parent to parent length 670 - - - - - - 670 - - -

PSTN: Parent to gateway length 577 - - - - - - 577 - - -

Interconnect length 287 - - - - - - 29 259 - -

Data incl leased lines length 5,156 78 - 4,745 2 18 18 - 1 293 -

DSL transmission length 4,243 - - - 4,243 - - - - - -

Other data length 6,642 - - 4,656 1,559 - - - 32 395 (1)

NGN length 8,775 - - 2,453 6,321 - - - - - -

Other transmission length 571 76 - 181 12 - - 60 20 222 -

Data platforms

Legacy leased lines 9,139 2,467 - 6,416 16 108 108 - 16 4 4

Other data platforms 14,465 - - 2,577 1,552 - - - 20 10,311 5

Outpayments 100,905 380 11 490 - - - 84,041 144- 16,030 97

Carrier administration 15,140 3,746 1,000 2,433 2,559 343 248 64 1,066 3,680 -

Carrier billing 6,108 824 (71) 441 513 572 455 941 335 2,042 57

Other SMP elements 1,490 - 372 - - - - - 1,110 7 1

Non-SMP elements 3,344 - 67 - - - - - - 3,277 1

Total Wholesale Costs 648,735 303,400 5,851 69,339 93,329 18,185 17,263 94,722 8,547 37,916 182

(a) Included in Miscellaneous Allocated Costs are certain costs that are shared between Retail and Wholesale and cannot be reported directly within the Network Statement of Costs

25

Network Cost Market Summary For the year ended 30 June 2012

Restated

Full allocated Cost (€'000) Tota

l O

pera

ting a

nd C

apital

Costs

Whole

sale

Fix

ed

Narr

ow

band A

ccess

Whole

sale

Unbundle

d

Access

Whole

sale

Leased L

ines

Whole

sale

Bro

adband

Access

Whole

sale

Call

Term

ination

Whole

sale

Call

Origin

ation

Whole

sale

Call

Tra

nsit

Whole

sale

Resid

ual

(Regula

ted)

Whole

sale

Resid

ual

(Unre

gula

ted)

Reta

il R

esid

ual

Copper access network 235,287 230,082 2,086 3,118 - - - - - 1 - 235,287 0

- - - - - - - - - - -

- - - - - - - - - - -

Fibre/High Speed Access Network 9,211 1,088 - 5,735 - - - - 2,298 90 - 9,211 - 254,508

- - - - - - - - - - -

NGA 4,851 - - - - - - - - 4,851 -

- - - - - - - - - - -

DSL equipment 27,190 - - - 27,190 - - - - - - 27,190 -

Other access equipment 6,376 2,404 - 3,957 - - - - - 15 - 6,376 - 7,845

- - - - - - - - - - -

Provisioning wholesale networks 41,882 29,182 2,432 1,848 6,955 - - - 1,037 418 9 41,881 1 28,112

Repair wholesale networks 27,110 19,878 50 1,474 4,947 63 64 17 467 150 - 27,110 - 7,305

- - - - - - - - - - -

Line Sensitive - - - - - - - - - - -

Subscriber unit - line sensitive 25,941 25,941 - - - - - - - - - 25,941 - 32,705

- - - - - - - - - - -

Call Sensitive - - - - - - - - - - - -

Subscriber unit - call sensitive 4,252 - - - - 2,103 2,150 - - - - 4,253 (1) 28,232

Parent switch - call sensitive 5,562 - - - - 2,262 2,316 984 - - - 5,562 -

Gateway switch - call sensitive 1,731 - - - - - - 1,731 - - - 1,731 -

- - - - - - - - - - -

Traffic sensitive - - - - - - - - - - -

Subscriber unit - traffic sensitive 4,881 - - - - 2,474 2,407 - - - - 4,881 - 986

Parent switch - traffic sensitive 4,844 - - - - 2,070 2,009 765 - - - 4,844 -

Gateway switch - traffic sensitive 2,035 - - - - - - 2,035 - - - 2,035 -

- - - - - - - - - - -

Interconnect equipment 253 - - - - - - (33) 286 - - 253 - 4,825

- - - - - - - - - - -

Intelligent Network 2,748 - - - - 1,195 1,220 333 - - - 2,748 -

- - - - - - - - - - -

Other switching elements 729 - - - - - - 151 577 - - 728 1

- - - - - - - - - - -

Transmission network - - - - - - - - - - -

Transmission: Non-length dependent - - - - - - - - - - -

PSTN: RSU to parent link 13,077 - - - - 6,627 6,449 - - - 1 13,077 -

PSTN: Parent to parent link 1,892 - - - - - - 1,892 - - - 1,892 -

PSTN: Parent to gateway link 1,255 - - - - - - 1,255 - - - 1,255 -

Interconnect link 1,867 - - - - - - - 1,867 - - 1,867 - 14,736

Data incl leased lines link 12,613 246 - 11,854 - 61 61 - - 389 1 12,613 - 2,015

DSL transmission link 12,552 - - - 12,552 - - - - - - 12,552 - 1,419

Other data link 3,665 - - 2,343 1,240 - - - 20 63 (1) 3,665 - 2,892

NGN Link 18,571 - - 9,298 9,273 - - - - - - 18,571 - 20,832

Other transmission link 5,336 4,040 - 347 2 18 19 180 67 656 8 5,337 (1) 18,356

- - - - - - - - - - -

Transmission: Length dependent - - - - - - - - - - -

PSTN: RSU to parent length 2,506 - - - - 1,270 1,236 - - - - 2,506 - 7,739

PSTN: Parent to parent length 496 - - - - - - 496 - - - 496 -

PSTN: Parent to gateway length 564 - - - - - - 564 - - - 564 -

Interconnect length 345 - - - - - - 30 315 - - 345 - 3,996

Data incl leased lines length 5,870 42 - 5,425 - 11 11 - - 381 - 5,869 1 431

DSL transmission length 2,964 - - - 2,964 - - - - - - 2,964 - 450

Other data length 6,828 - - 5,159 1,480 - - - 45 143 - 6,827 1 233

NGN length 7,307 - - 1,337 5,970 - - - - - - 7,307 - 8,494

Other transmission length 668 69 - 171 22 - - 67 34 301 5 669 (1) 7,960

- - - - - - - - - - -

Data platforms - - - - - - - - - - -

Legacy leased lines 10,002 2,374 - 7,448 - 85 85 - - 10 - 10,002 - 576

Other data platforms 16,145 - - 3,381 2,290 - - - 26 10,439 10 16,146 (1)

- - - - - - - - - - -

Outpayments 123,576 284 23 84 - - - 97,743 249 25,160 34 123,577 (1) 11,223

- - - - - - - - - - -

Carrier administration 13,476 1,617 923 2,277 1,611 316 266 75 1,069 5,321 1 13,476 -

Carrier billing 10,251 382 (215) 409 1,037 976 902 1,025 448 5,189 99 10,251 - 189,853

- - - - - - - - - - -

Other SMP elements 1,266 - 454 - - - - - 754 58 - 1,266 - 6,854

- - - - - - - - - - -

Non-SMP elements 6,201 - 82 - - - - - - 5,926 194 6,202 (1)

- - - - - - - - - - -

Total Wholesale Costs 684,176 317,629 5,835 65,666 77,533 19,531 19,195 109,310 9,559 59,560 361

(a) Included in Miscellaneous Allocated Costs are certain costs that are shared between Retail and Wholesale and cannot be reported directly within the Network Statement of Costs

26

Notes to the Financial Statements

Note 1: Comparative Figures and Methodology Changes ComReg requires that where data for the previous financial year is not comparable, as a result of a material change in accounting policy, cost attribution or material error, the figures for the preceding year must be adjusted to the extent that it is reasonable to do so. Details of restatements to comparative figures are set out below. These amendments largely relate to allocations within the markets disclosed in these financial statements. The impact of these changes at the overall market level has been set out in summary below. Market 2012

Original Return €’000

2012 Restated Return €’000

Wholesale Fixed Narrowband Access 113,790 112,613 Wholesale Unbundled Access (855) (859) Wholesale Broadband Access 33,427 33,507 Wholesale Leased lines 25,204 25,939 Wholesale Other 25,642 25,118 Retail 113,259 114,147 White Label Access (WLA) In previous years, eircom have classified the Wholesale Line Rental (WLR) and Bitstream revenues associated with the White Label Access (WLA) service in the relevant Fixed Narrowband Access and Broadband Access Markets in the financial statements. In the current year, at the request of ComReg, White Label Access

includes the WLR and Bitstream revenues generated by WLA customers in the Wholesale Residual Unregulated statement rather than in the relevant Fixed Narrowband Access and Broadband Access statements. A transfer charge, based on volumes and the appropriate tariffs, has also been determined from these markets. This has reduced external revenue and increased internal IBU revenue in these Access Markets. The prior year figures for these markets have been restated for consistency. Amendment to MSA IBU Methodology An IBU charge is required to be applied from the Wholesale Ethernet product to the Retail Ethernet business. An amendment was made in the current year to the methodology employed in the determination of the IBU charge for the Ethernet Multi Site Access product. As part of this change management have also re-assessed the appropriate network configuration for the delivery of the equivalent wholesale service for this retail product. The prior year IBU and result for the relevant markets have been restated for consistency. Transmission Study The allocation of transmission costs between leased lines and PPC was automated in the current year and this automation has impacted the allocation of costs and the prior year result has been restated for consistency.

Other restatements The preparation of these financial statements requires estimation of the appropriate utilisation of network equipment by pre-defined product and service offerings. The principles under which the financial statements are prepared require that the network cost components are aligned as closely as possible with the external and IBU revenues arising in respect of these specific products. The determination of the

27

Notes to the Financial Statements

appropriate usage of network components requires a level of estimation and certain assessments have been revised in this respect in the current year to more closely align the revenues and costs at the product level. The related prior year comparatives were re-stated for consistency. The adjustments have also been appropriately reflected in the ‘Statements of cost and revenue by service’ to ensure they are consistent.

28

Note 2: Intra/Inter Business Turnover Reconciliation

FROM / TO

Wholesale

Access

Wholesale

Access

Wholesale

Other

Wholesale

OtherRetail Retail

30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13 30-Jun-13

Intra Inter Intra Inter Intra Inter Intra Inter

€'000 €'000 €'000 €'000 €'000 €'000

Turnover originating in:

eircom Limited: InterCheck IntraCheck

Wholesale Access: Wholesale Fixed Narrowband Access - - 23,729 - 233,881 - 257,611 -

Wholesale unbundled access - - - - - 114 - 114

Wholesale Broadband Access - - 1,404 - 54,710 - 56,114 -

Wholesale Leased Lines - - 424 - 26,099 17,341 26,523 17,341

Total - - 25,557 - 314,691 17,455 340,248 17,455

Wholesale Other: Wholesale Call termination - - 1,832 - 5,444 1,218 7,277 1,218

Wholesale Call Origination - - 1,881 - 9,937 - 11,818 -

Wholesale Call transit - - 10,380 - 38,467 8,136 48,847 8,136

Wholesale Residual (Regulated) - - 268 - 4,791 3,568 5,059 3,568

Wholesale Residual (Unregulated) - - - - 17,516 12,223 17,516 12,223

Total - - 14,362 - 76,156 25,145 90,518 25,145

Retail PSTN & ISDN Access - - - - - 244 - 244

Meteor - 743 - 11,344 - 706 - 12,793

Other Subsidiaries - 118 - 8,961 - 4,834 - 13,912

Retail Other - - 15,316 - - 10,296 15,316 10,296

Total - 860 15,316 20,305 - 16,079 15,316 37,245

TOTAL - 860 55,235 20,305 390,846 58,679 446,082 79,845

TOTAL

29

Note 3: Income Statement Reconciliation

Consolidated market groups

Income Statement Reconciliation


RevenueOperating

costsReturn Revenue

Operating

costsReturn

2013 2013 2013 2012 2012 2012

€'000 €'000 €'000 €'000 €'000 €'000

Restated Restated Restated

Wholesale Access 485,271 348,565 136,706 516,433 345,232 171,201

Wholesale Other 246,087 217,336 28,752 278,765 253,647 25,118

Retail 1,172,316 1,091,659 80,657 1,280,412 1,166,265 114,147

Total 1,903,674 1,657,560 246,115 2,075,610 1,765,144 310,466

Adjustments

Elimination of Inter Business turnover and costs between wholesale and retail (63,766) (63,766) - (64,128) (64,128) -

Transfer charges between Retail and Wholesale (446,082) (446,082) - (496,060) (496,060) -

Interest payable and similar charges disallowed - - (237,256) - - (93,513)

Other Subsidiary project finance costs included in operating costs (allowable) - (1,529) - - (2,076) -

Share of profit of associates - 78 (78) - (193) 193

Tax on profits on ordinary activities - - (8,078) - - (28,043)

Impact of change to asset lives - 33,296 (33,296) - 42,356 (42,356)

IFRS Pension Adjustment - 80,229 (80,229) - 24,212 (24,212)

Amortisation and Impairment of Intangible Assets - - - - - -

Impairment of Goodwill - - - - - -

Gain on Disposal of Subsidiaries - (123,523) 123,523 - - -

Financial Guarantee (Release)/Provision - - - - (2,422,692) 2,422,692

Debt assumed under examinership arrangement - - - - 1,805,419 (1,805,419)

Non relevant eircom operating costs - 28,190 (28,190) - (151,595) 151,595

As in the Annual Report 1,393,826 1,164,454 (17,489) 1,515,422 500,386 891,403

30

Note 4: Statement of Mean Capital Employed Reconciliation

Consolidated market groups

Statement of Mean Capital Employed Reconciliation

As at 30 June 2013

Capital employed Capital employed

2013 2012

€'000 €'000

Restated

Shareholders' funds as in the Annual Report (493,119) (479,541)

Reconciling items

Investments in Associated Undertakings (730) (808)

Finance Income Payable / (Receivable) Net 361 2,053

Taxation 21,026 26,080

Deferred Taxation provision (net) 58,314 62,698

Restructuring Provision 8,043 52,919

Pension Benefit Asset (139,939) (246,246)

Financial Guarantee provision - -

Liabilities for non relevant eircom operating costs 91,739 123,716

Elimination of financing balances 338,148 -

Elimination of intercompany financing balances 1,624,311 1,820,140

Closing capital employed 1,508,155 1,361,011

Opening capital employed 1,361,011 1,490,239

Total adjusted mean capital employed before determined adjustments 1,434,583 1,425,625

Impact of changes to asset lives 287,891 250,180

Total mean capital employed 1,722,474 1,675,805

183

Wholesale Access 1,208,184 1,196,453

Wholesale Other 142,293 189,186

Retail 371,997 290,166

Total mean capital employed 1,722,474 1,675,805

Shouldn’t dissallow mean

Disallowing from py mean

mean 830024a should have dis

31

Definitions

Definitions of the Markets and Businesses eircom business structure

eircom is a unitary business having one network with support functions. It consists of a customer facing division (eircom Retail) and a division responsible for providing customers with telephony services, maintaining the core switching and transmission networks, and providing and maintaining customer connections to this network (eircom Wholesale). A number of additional services are supplied by subsidiary companies which maintain separate accounting records.

eircom Retail

PSTN and ISDN access (rental and connections)

eircom provide the majority of our residential and business customers in Ireland with access services through copper wires that connect the customer's premises to the nearest exchange in our network. A small number of our business customers are provided with access services through fibre optic cables. Turnover from access services is derived from monthly line rental fees and connection charges. These products are regulated and contained within the “Retail Fixed Narrowband Access” market.

PSTN and ISDN traffic (voice and data)

eircom’s traffic offering includes local, national, fixed-to-mobile, international and dial up data services to residential and business customers throughout Ireland at tariffs that vary depending on a number of factors, including the duration of the call, the distance between the points of origin and destination, the time of day and the day of the week the call is made, and any discount package selected by the customer.

Advanced traffic services include a wide range of advanced voice services, including Freefone, cost-shared and premium rate services, virtual private networks and eircom Teleconference. These services are contained within the “Retail Other” market.

Broadband - Asymmetrical Digital Subscriber Line (ADSL)

We have an extensive range of broadband services targeted at residential and business customers. We provide various fixed-line ADSL services, aimed at the residential and business markets. The majority of our DSL fixed-line packages are based on rate-adaptive ADSL technology. These services are contained within the “Retail Other” market.

eFibre

eircom launched eFibre high speed broadband services on 20 May 2013 to both residential and business customers. The services utilise VDSL Next Generation Access (NGA) products, provided by a combination of fibre to the cabinet (FTTC) and copper pair distribution from cabinet to customer premises. These services are contained within the “Retail Other” market.

Data communications

eircom offers a wide range of national and international data communications services, including leased lines, internet protocol (“IP”) networks and Ethernet services. Specific services include; Leased Lines (National and International) Business IP, either bandwidth only (BIP Connect) or end to end

(BIP Partner) Legacy Ethernet (Local, Metro, National) Next Generation Network Data Services, including NGN Ethernet

and NGN IP. These services are contained within the “Retail Other” market.

32

Definitions

Dial-up Internet services

eircom offers the provision of metered and unmetered dial-up internet services through our ISP, eircom.net. These services are contained within the “Retail Other” market

Other services

eircom Retail also provides a number of other services, including Public Payphones, Customer Premises Equipment (CPE), Directory Enquiry and Operator Services, Webhosting and VoIP and Data Centre Services. These services are contained within the “Retail Other” market.

eircom Wholesale Unbundled Access

eircom is required to make the local networks available to other telecommunications companies on a wholesale basis, i.e. share access to unbundled local loops. eircom is obliged to provide Local Loop Unbundling (LLU) access services to OAOs and to publish an Access Reference Offer (ARO), which describes the access services on offer. Unbundled local loop access requires the physical co-location of infrastructure owned by OAOs on eircom premises in order to permit such operators to access unbundled local loop services. eircom is also required to enable an end customer’s telephone number to migrate to LLU. The prices of these services are regulated through our ARO. These regulated services are included in the “Wholesale Unbundled Access” market.

Wholesale Access Channels

Carrier pre-selection single billing through Wholesale Line Rental (WLR) allows an operator to resell our access service and provide the customer with a single bill for access and call services. eircom are

required to maintain and repair the access line, which remains connected to the switched network, and bill the operator for the line. The OAO bills the end customer for the operator's bundled service. This service is only available if the end customer has made a carrier pre-selection for all call types with the relevant operator. These regulated services are included in the “Wholesale Fixed Narrowband Access” Market.

ADSL Bitstream

Bitstream is a broadband access product that eircom offers to OAOs. It consists of a high-speed access link to the customer's premises, which is created by installing ADSL equipment and configuring the Local Access network. eircom are required under relevant regulations to provide ADSL bitstream access to OAOs and to publish a Bitstream Access Reference Offer (BARO) describing the ADSL bitstream services that eircom offers. We currently offer a range of ATM and IP based services at a variety of speeds and levels of contention, and, in line with our Regulatory obligations, effectively offer to our wholesale customers equivalent products to our Retail ADSL offerings. These regulated services are contained within the “Wholesale Broadband Access” market.

Bitstream Plus Service

Bitstream Plus is a Next Generation Access (NGA) Broadband product that eircom offers to OAOs. It consists of a high speed broadband access link to the customer’s premises. In most cases the service is provided using FTTC with Very High Speed Digital Subscriber Line (VDSL) equipment but in certain limited situations eircom offers Fibre to the Home (FTTH). eircom are required under the relevant regulations to provide NGA Bitstream access to OAOs and to publish details in the BARO. eircom currently offer a range of end-to-end (i.e. from the customer to the OAO handover point) based services at a variety of speeds and levels of contention. Alternatively, and where

33

Definitions

available, OAOs may purchase a “per port” customer line Bitstream product and also a backhauling Bitstream product from the eircom local exchange to the OAO handover point. These services effectively offer to our wholesale customers’ equivalent products to our Retail eFibre offerings. These regulated services are contained within the “Wholesale Broadband Access” market.

Virtual Unbundled Access (VUA) Service

Virtual Unbundled Access (VUA) is an NGA alternative of unbundled access. eircom is obliged to provide VUA services to OAOs and to publish the offerings in the Bitstream Access Reference Offer (BARO).

VUA requires the physical co-location of infrastructure owned by OAOs on eircom’s premises in order to permit such operators to access VUA services. eircom are also required to provide services to enable an end customer’s telephone number to migrate to VUA. The prices of these services are regulated through our ARO. These regulated services are included in the “Wholesale Unbundled Access” market.

Interconnection Services (Call Origination, Call Termination

and Call Transit)

Interconnection services include both the physical link of our telecommunications network with that of OAOs, and the traffic that passes over the link. eircom provides interconnection services to OAOs in Ireland and to international operators for incoming international calls.

ComReg has designated eircom as having SMP in the interconnect markets, and therefore we are obliged under the relevant regulations to provide interconnection services to other domestic authorised operators and to publish a Reference Interconnect Offer (RIO). We also provide interconnection services to international customers for incoming international calls at settlement rates that we negotiate with

them.

These services are split across a number of markets. Domestic traffic charges are regulated and are included where relevant in “Wholesale Call Origination”, “Wholesale Call Termination” and “Wholesale Call Transit”. Interconnect link charges are regulated and are included in “Wholesale Residual (Regulated)”. International traffic charges are not regulated and are included in “Wholesale Residual (Unregulated)”.

Wholesale Leased Lines, Partial Private Circuits and

Wholesale Ethernet

eircom provides OAOs with Wholesale leased lines, Partial Private Circuits (“PPCs”) and Wholesale Ethernet as set out in the Leased Line Reference Offer (LLRO). These services are included in the “Wholesale Leased Lines” market. Interconnect paths, which are dedicated leased lines connecting our network to that of another authorised operator, are included in the “Wholesale Residual (Regulated)” market.

Wholesale Other Non-regulated

Wholesale Residual (unregulated) includes services where there is no specific price regulation. The key products and services include White Label Access, International services Chargeable Customer Premises Equipment (CPE) work, Repayable Works Orders, Duct Rental and various Managed services.

34

Definitions

eircom Group Subsidiaries

Set out below are descriptions of eircom’s most significant subsidiary companies:

Meteor

eircom provides a variety of wireless products and services designed to match a range of needs for business and personal use. The mobile business is conducted through Meteor Mobile Communications Limited (Meteor) which offers these services under two brands, Meteor and eMobile. These services include voice, SMS, MMS, Data charges and device sales for both pre-paid and post-paid mobile customers. The results of this subsidiary are included in the “Retail Other” market.

Tetra Ireland

Tetra Ireland Communications Limited (“Tetra Ireland”), a consortium consisting of eircom Group, Motorola and Sigma Communications Group Ltd, for the provision of nation-wide digital radio services established for the major state emergency and security agencies (e.g. Garda, Prisons, Revenue Commissioners and Ambulance service). eircom’s 56% share of the result of these services are included in the “Retail Other” market.

eircom UK

eircom UK Limited (“eircom UK”) is involved in the provision of data and voice services for Enterprise and Wholesale customers operating between and within Ireland and the United Kingdom (including Northern Ireland).The results of this subsidiary are included in the “Retail Other” market.

Phonewatch

eircom disposed of its subsidiary eircom Phonewatch Limited (Phonewatch) to Sector Alarm Corporation on 10 May 2013. The results of this subsidiary up to that date are included in the “Retail Other” market.

35

Annex 1: Explanatory Report

36

Explanatory Report – HCA Separated Accounts

This explanatory report sets out and clarifies trends relating to relevant markets, including any significant future impact on eircom‟s business of Regulatory Decisions which have been published by ComReg. The report includes commentary in respect of:

Trends relating to revenue, by Relevant Market; Trends relating to volumes, by Relevant Market; Significant period on period movements in the reported performance and balances; One-off or exceptional events in the period; and The impact of material changes in Accounting Policies, methodologies and estimation techniques (if any) and the extent to which they impact on eircom‟s Separated Accounts.

Overall the consolidated group position shows declining revenue with declines in each of wholesale access, wholesale other and retail.

Operating costs also reduced, with a larger decline (14%) in wholesale other and 6% decline in retail. Wholesale Access costs declined only marginally.

The overall return reduced by 21%, with the decline in wholesale access at a similar level. There was a significant improvement in the return on wholesale other.

Investment in wholesale access infrastructure networks and retail systems contributed to a rise in overall capital employed, by 3%.

Overall Return on Capital employed declined from 19% to 14%, Return on Wholesale Access was 11% and Wholesale Other and Retail were 20% and 22% respectively. This represents an improvement in Wholesale Other and a deterioration in Retail. Each of the relevant markets is considered in more detail below. References below to the overall national position refer to data from

ComReg report 13/87, which contains Key Data for the market for the period to 30 June 2013.

37

Explanatory Report - Wholesale Access Business - Wholesale Fixed Narrowband Access

Market Definition The market consists of links between end users and concentrators, including analogue and ISDN technologies.

Key Market Products The Wholesale Fixed Narrowband Access market largely consists of products providing wholesale access to PSTN and ISDN lines, known as Single Billing Wholesale Line Rental ('SB-WLR‟). eircom‟s Reference Interconnect Offer (RIO) includes a number of principal SB-WLR products within this market:

PSTN and ISDN Connections PSTN Rentals ISDN Basic Rate Access Rentals ISDN Primary Rate Access Rentals ISDN Fractional Rate Access Rentals

The market provides these services both externally to Other Authorised Operators ('OAOs') and internally to eircom Retail.

Regulatory pricing framework Prices for SB-WLR products are set on a “Retail minus” basis, where products are offered at a minimum fixed discount to their retail equivalents. The current price differential, established in May 2008 and in force throughout the year ended 30 June 2013 is 14%. The resultant maximum prices for the principal SB-WLR products are as follows: Product Price €

PSTN Connection 92.39 ISDN Connection Varies PSTN Rental 18.02 ISDN BRA Rental 27.95 ISDN PRA Rental 238.25 ISDN FRA Rental 143.18

eircom offers promotional discounts on Retail PSTN and ISDN Connections Rental, at which time equivalent wholesale promotional discounts were offered. eircom Wholesale also offer additional promotional prices. As a result, during 2012/3, the promotional price was €0.00.

eircom introduced a WLR Discount of €3.00 from 20 May 2013. The discount applies for 18 months from 20 May 2013 to lines linked to Broadband in the Larger Exchange Area (LEA). The LEA is an area defined by ComReg in Decision notice D04/13 “Price Regulation of Bundled Offers” where the telephony and Broadband market are more competitive.

Regulatory Decisions in the year No relevant Regulatory Decisions were published in the year that had a direct impact on WLR prices.

Trends in Reported Balances

Revenues/Volumes

Overall eircom‟s volume in this market declined during the year due to the impact of fixed mobile substitution, competition, current economic conditions and alternative technologies on the total number of channels supplied. eircom‟s 5% year on year reduction in market volumes contrasts with the rising national trend. According to data published by ComReg, voice subscriptions in Ireland grew by 3.9% in the year to June 2013, as the continuing growth of cable subscriptions offset the decline in the eircom fixed network. The volume trend is reflected in a 5% reduction in market revenues in the year.

eircom continues to experience losses in market share in favour of Other Authorised Operators. External revenues fell 2% while internal revenues fell 6%.

38

Explanatory Report - Wholesale Access Business - Wholesale Fixed Narrowband Access

Operating Costs/Profit

Overall operating costs have declined by 5%. This can be attributed to two broad factors;

Reduction in repair and maintenance costs of 13% in this market arising from efficiencies and lower line numbers; Other costs, including depreciation, remaining broadly in line with the previous year‟s level.

The reduction in operating costs was smaller than the decline in market revenues. As a result the operating profits fell by 5%.

Return on Capital Employed

The Wholesale Access Mean Capital Employed (MCE) rose by 1% overall, but the MCE for the Wholesale Narrowband Access market declined by 4%. This reflects a shift of investment to Next Generation platforms, including Next Generation Access.

The reduction in capital employed in this market has led to the Return on Capital Employed remaining at 13% despite the decline in the market return.

Exceptional events/Methodology changes No exceptional events occurred in the year that materially impacted on the revenue or returns in respect of Wholesale Fixed Narrowband Access.

39

Explanatory Report - Wholesale Access Business - Wholesale Unbundled Access

Market Definition The market for Unbundled Access (also known as Wholesale Physical Network Infrastructure Access (WPNIA)) consists of the provision of direct access to eircom copper connections between customer premises and Main Distribution Frames (MDFs). This market provides services wholly to other OAOs, as eircom Retail acquires copper connections through more consolidated products (Wholesale Line Rental & Wholesale Bitstream Access).

Key Market Products

eircom‟s Access Reference Offer (ARO) includes two principal products:

Unbundled Local Metallic Path (ULMP) - LLU Line Share (LS)

In addition a number of ancillary services exist in support of these principal services, including:

Connection charges Co-Location fees Disconnection charges Site preparation charges

Regulatory pricing framework Prices for Access Reference Offer services are subject to direct approval by ComReg. Under Decision D01/10 eircom was directed to charge no more than the following prices for Local Loop Unbundling (LLU) and Sub-Loop Unbundling (SLU) monthly rental and LS monthly rental to OAOs:

LLU – €12.41 per line per month. This price applied up to 31 January 2013, and was reduced to €9.91 per month from 1 February onwards; and

SLU – €10.53 per line per month. This price applied up to 31 January 2013, and was reduced to €9.03 per month from 1 February onwards.

Under Decision D04/09 (document 09/66) eircom was directed to apply no more than a maximum of €0.77 per month as a Line Share recurring charge and this price has applied since 2009.

The rental prices in force during the financial year for the principal services are therefore as follows:

Service Price €/month

(up to

31 January 13)

Price €/month

(from

1 February 13)

Unbundled Local Metallic Path 12.41 9.91 Sub-Loop Unbundled Metallic Path

10.53 9.03

Shared loop metallic path 0.77 0.77

There were some minor price reductions in prices for certain ancillary services associated with unbundled access during the year ended 30 June 2013.

Regulatory Decisions in the year

ComReg published D03/13 (the NGA Decision) on 31 January 2013, which has significant provisions regarding access to infrastructure including duct and dark fibre, and provisions regarding the relative pricing of WPNIA, and WBA products.

40

Explanatory Report - Wholesale Access Business - Wholesale Unbundled Access


Revenues/Volumes

Following the launch of Next Generation Access services on 20 May 2013, some wholesale customers have commenced migration of line share or LLU end-users to active NGA products such as VUA, which are included in the Wholesale Broadband Access Market. This is offset by large volumes of connections by new entrants to the market utilising line share, such that overall volumes are growing.

This market has experienced 22% growth year on year in volumes, with 23% growth in Line Share volumes and 18% growth in LLU lines. Much of the volume growth was in the latter part of the year.

The decline in revenues in this market (21%) arises due to: Rental Price reductions offsetting volume increases such that rental revenues declined by 5%, reductions in revenues associated with connections and reductions in the amounts recognised in respect of co-location charges.

Overall Operating Costs/Profit

Overall operating costs for unbundled access have declined by less than 1%, so the return has reduced in line with revenues.


Line share accounts for the bulk of the unbundled access activity, but it does not involve any significant capital employed as it is priced on an incremental cost basis.

Given the relatively small revenues and usage of network assets, capital employed is not meaningful.

Exceptional events/Methodology changes No exceptional events occurred in the year that materially impacted on the revenue or returns in respect of wholesale unbundled access. .

41

Explanatory Report - Wholesale Access Business - Wholesale Broadband Access

Market Definition The market is defined by ComReg as consisting of:

Wholesale Broadband Access ('WBA‟) provided over DSL/copper network infrastructure; and Wholesale Broadband Access provided over fibre network infrastructure.

Key Market Products eircom‟s Bitstream Access Reference Offer (BARO) currently includes three principal types of products:

ADSL Legacy Bitstream access. ADSL Bitstream Managed Backhaul (BMB) access, including port rental and traffic. VDSL Next Generation Access (NGA) products, provided by a combination of fibre to the cabinet (FTTC) and copper pair distribution from cabinet to customer premises, (launched on 20 May 2013).

These products are segmented by service characteristic, primary line speed and contention ratio. The products are offered both externally to OAOs and internally to eircom Retail.

Regulatory pricing framework

Prices for Bitstream products are controlled by D01/06 (Document 06/01) which is designed to ensure that eircom shall, pursuant to Regulation 14 of the Access Regulations, have SMP obligations relating to wholesale price control in the market for WBA, in the form of a retail minus price control.

The control specifies the minus element as a combination of a monetary amount and percentage, which differs for each product.

The main price changes impacting on the 2013 market revenues was

the reduction of the Bitstream Managed Backhaul usage charge from €50 per Mb to €30 per Mb on 1 July 2012. A further reduction to €20 per Mb effective from 1 July 2013 had no impact in the year ended 30 June 2013 but will affect future years.

42

Explanatory Report - Wholesale Access Business - Wholesale Broadband Access

Regulatory Decisions in the year During the year, ComReg published two significant decisions D03/13 (the NGA Decision) on 31 January 2013 and D04/13 (the Bundling Decision) on 8 February 2013. These decisions have far reaching implications for the products, and the prices eircom can charge in the WBA and NGA-WBA markets. These Decisions require margin squeeze tests between various levels of NGA access (Sub-loop access, Virtual Unbundled Access, Bitstream, White Label and Retail) for both PSTN-based and stand-alone NGA Broadband. ComReg has signalled its intention to revise the provisions of D01/06 for some time and initiated a consultation on price controls for Wholesale Broadband on 19 September 2013.


Revenues/Volumes

According to ComReg, growth in the overall market for fixed broadband in Ireland was 5.3% in the year to 30 June 2013 with significant growth in cable and unbundled access, while eircom‟s DSL volumes fell. The launch of NGA in May did not significantly impact on market volumes in the year, but there was continuing growth in Bitstream Managed Backhaul (BMB) services and a decline in Legacy bitstream driven by the extension of the BMB footprint.

Revenues in the Wholesale Broadband Access market declined over 11% year on year, with the fall in legacy bitstream volumes contributing most of the decrease. Price reductions on Bitstream Managed Backhaul usage charges led to a 19% decrease in BMB usage revenue despite growth in both users and average peak traffic per user. Migration to higher priced 24Mb ports explains why additional port revenue outpaced user growth.


Overall operating costs increased significantly due to the installation and launch of NGA. When combined with the reduction in revenues, the operating profit fell by €22m or 64%.


Mean capital employed increased by 23% in the year. The increase combined with a reduction in operating profit, had the effect of reducing the Return on Capital Employed to 6% from 19% in the previous year.

Exceptional events/Methodology changes The introduction of NGA resulting in significant additional costs but the launch late in the year meant little additional revenues arose. The accounts will reflect the costs of running the old and new technology during the changeover period.

43

Explanatory Report - Wholesale Access Business - Wholesale Leased Lines

Market Definition This market consists of the supply of all leased line connectivity to OAOs and eircom Retail. This market consists of three broad leased lines categories:

Partial Private Circuits (PPC) Wholesale Leased Lines Wholesale Ethernet Services

Key Market Products These products are segmented by service characteristic, primary capacity/bandwidth and distance.

Regulatory pricing framework

Prices for all Partial Private Circuits and Wholesale Leased Line products with a capacity of 2Mb and below are published in eircom‟s Leased Line Reference Offer (LLRO). Prices for all other products in the Wholesale Leased Lines market are subject to regulatory approval.

Regulatory Decisions in the year No relevant Regulatory Decisions were published in the year.


Revenues/Volumes

ComReg does not publish statistics for the Wholesale Leased Line market. Overall eircom‟s volume and revenues in this market are in decline due to the increase in competition from alternative infrastructure, including self-supply undertaken by OAOs. The overall decline is only partly counteracted by the growth of Next Generation Data products.

This reduction in demand has been reflected by a 5% reduction in market revenues. Ethernet revenue grew by €7 million (48%) reflecting the continuing market shift to IP based services. However, PPC and Leased Line revenue fell by over €10 million (18%).


Overall operating costs have increased by a 6%. This is due primarily to an increase in depreciation of 8% with other costs relatively stable. The increase in operating costs combined with the decline in market revenues has the result of reducing operating profits by 24% compared to the prior year.


The capital employed for wholesale leased line business has increased by 4%. This combined with the drop in profit has the effect of reducing the return of capital employed to 11%.

Exceptional events/Methodology changes

No exceptional events occurred in the year that materially impacted on the revenue or returns in respect of Wholesale Leased Lines.

44

Explanatory Report - Wholesale Other Business - Wholesale Call Origination

Market Definition This market consists of the conveyance of calls originating on eircom exchange lines from the subscriber units to the relevant parent exchange.

Key Market Products eircom‟s Reference Interconnect Offer (RIO) includes a number of products that utilise call origination: Primary Call Origination Single Tandem Call Origination Double Tandem Call Origination

The Call origination market represents two wholesale products: External Call Origination – which includes the provision of the above call origination services to OAOs, which interconnect with eircom at different levels. Internal Call Origination – which includes the provision of call origination for eircom Retail and other on-net calls types such as white label products. Call completion of on-net calls require network services beyond those available to OAOs. For this, a charge is derived from the cost inputs in the Wholesale Call Conveyance pricing model for Primary Call Origination. In the context of external call origination, the Single Tandem and Double Tandem Call Origination services comprise network services extending beyond the parent exchange. As the call origination market is limited to conveyance up to and including the local parent exchange, eircom has identified the Primary Call Origination charge as being the appropriate charge to apply to this market. Therefore the Tandem and

Double Tandem revenues exclude those charge elements in excess of the Primary rates with the differential being reported in the Transit market. Regulatory pricing framework Prices for RIO call origination services are subject to direct approval by ComReg. Under Decision D04/07 (document 07/80 Market Analysis Interconnections Market Review: Wholesale Call Outstanding and Transit Services) prices are required to be cost oriented and such costs are required to be calculated using a pricing model. This pricing model should be based on forward looking long run incremental costs (“FL-LRIC”) or an alternative pricing model, if ComReg decides, following consultation, to adopt such an alternative pricing model. Prices are published in the “eircom Reference Interconnect Offer price list”. The Call Origination prices in force during the financial year ended 30 June 2013 were as follows: eircom National Origination (Euro Cent)

Cent per Minute Cent per Call

Charging Level Day Evening Weekend Day Evening Weekend

Primary 0.2344 0.1301 0.1144 0.666 0.3689 0.3231 Single Tandem 0.3398 0.1877 0.1645 0.7362 0.4073 0.3565 Double Tandem 0.4194 0.232 0.203 0.7694 0.4255 0.3727 Regulatory Decisions in the year No relevant Regulatory Decisions were published in the year. However, on 15 December 2011, eircom announced reductions in prices averaging 5% effective from 1 July 2012 and these have impacted revenues in the year ended 30 June 2013.

45

Explanatory Report - Wholesale Other Business - Wholesale Call Origination

Trends in Reported Balances Revenues/Volumes

Overall this market is in steady decline due to the impact of fixed mobile substitution, competition, current economic conditions and alternative technologies on both the total number of channels supplied and the proportion of minutes originating on fixed lines. This is reflected in a 13% reduction in both origination minutes and calls. The combination of this volume reduction and the 5% price reductions on 1 July 2012 led to an overall reduction in origination revenues of 17%. Operating Costs/Profit

Overall operating costs in this market have declined by only 9% so that operating profits were 45% lower than the prior year.


The total mean capital employed in this market declined by 14%. However as a result of the fall in operating profit, Return on Capital Employed decreased to less than 7%. Exceptional events/Methodology changes No exceptional events occurred in the year that materially impacted on the revenue or returns in respect of wholesale call origination.

46

Explanatory Report - Wholesale Other Business - Wholesale Call Transit

Market Definition This market consists of the conveyance of calls to parent exchanges and gateway exchanges.

Key Market Products eircom‟s Reference Interconnect Offer (RIO) includes a number of products that utilise call transit: Single Tandem Call Origination Double Tandem Call Origination Single Tandem Call Termination Double Tandem Call Termination

In essence, the above call types (include both a transit component and a component from either market 2 (call origination) or market 3 (call termination). The remaining call type is National Transit. The high revenues reported reflect the fact that the price for transit calls to mobile or Number Translation Codes (NTC, e.g. Premium rate calls) must also cover the relevant outpayment. The Call Transit market represents two wholesale products;

External Call Transit –The revenues associated with national transit plus an extraction of the relevant element of origination and termination

Internal Call Transit –The provision of call transit (including charges for additional internal network links) for on-net calls. The prices for additional links are derived from the associated charge elements in excess of the Primary rates for Call Origination and Call Termination and the Wholesale Call Conveyance pricing model.

Regulatory pricing framework Prices for RIO call services are subject to direct approval by ComReg. Under Decision D04/07 (document 07/80) prices are required to be cost oriented and such costs shall be calculated using a pricing model based on forward looking long run incremental costs (“FL-LRIC”) or an alternative pricing model, if ComReg decides, following consultation, to adopt such an alternative pricing model. The external prices in force during the financial year were as follows: Cent per Minute Cent per Call

Service

description

Day Evening Weekend Day Evening Weekend

National transit 0.2040 0.1120 0.0980 0.6210 0.3440 0.3010 Regulatory Decisions in the year No relevant Regulatory Decisions were published in the year. In particular, the Decision D12/12 (Fixed Voice Call Termination Rates) does not apply to the transit market. ComReg is expected to consult on Call Origination and Transit in 2013 but as of 30 November has not done so. Trends in Reported Balances Revenues/Volumes

This market is in overall decline resulting in a 7% reduction in transit minutes. Revenue declined by 13% year on year, with the decline due primarily to eircom‟s retail business, while external revenue and revenue from group mobile grew.

47

Explanatory Report - Wholesale Other Business - Wholesale Call Transit


Overall operating costs for call transit declined by 13%. This reduction was not sufficient to offset the decline in market revenues, and as a result the service is now showing an operating loss. Return on Capital Employed

Overall mean capital employed reduced by 20%. There is a negative 2% return on Mean Capital Employed. Exceptional events/Methodology changes No exceptional events occurred in the year that materially impacted on the revenue or returns in respect of wholesale.

48

Explanatory Report - Wholesale Other Business - Wholesale Call Termination

Market Definition This market consists of the conveyance of calls terminating on geographic numbers on eircom exchange lines from relevant parent exchanges to the subscriber unit. Key Market Products eircom‟s Reference Interconnect Offer (RIO) includes a number of products that utilise call termination; Primary Call Termination Single Tandem Call Termination Double Tandem Call Termination

The Call Termination market represents two wholesale products; External Call Termination – which includes the provision of the above call termination services sold to OAOs, which interconnect with eircom at different levels. Internal Call Termination – which includes the provision of call termination for eircom Retail and other on-net call types such as white label products. Call completion of on-net calls require network services beyond those available to OAOs. For this, a charge is derived from the cost inputs in the Wholesale call conveyance pricing model for Primary Call Termination. In the context of external call termination, the Single Tandem and Double Tandem Call Termination services comprise network services extending beyond the parent exchange. As the call termination market is limited to conveyance up to and including the local parent exchange, eircom has identified the Primary Call Termination charge as being the appropriate charge to apply to this market. Therefore the Tandem and Double Tandem revenues exclude those charge elements in excess of the Primary rates with the differential being reported in the Transit market.

Regulatory pricing framework Prices for RIO Call Termination services are subject to direct approval by ComReg. Under Decision D06/07 (document 07/109) Section 10.1 prices are required to be cost oriented and such costs are required to be calculated using a pricing model based on forward looking long run incremental costs (“FL-LRIC”) or an alternative pricing model, if ComReg decides, following consultation, to adopt such an alternative pricing model. Prices are published in the “eircom Reference Interconnect Offer price list”. The Call Termination prices in force during the financial year were as follows: eircom National Termination (Euro Cent)

Cent per Minute Cent per Call

Charging Level Day Evening Weekend Day Evening Weekend

Primary 0.2443 0.1350 0.1185 0.6772 0.3749 0.3282 Single Tandem 0.3553 0.1962 0.1722 0.7512 0.4157 0.3639 Double Tandem 0.4859 0.2687 0.2355 0.7912 0.4379 0.3835 Regulatory Decisions in the year On 21 November 2012 ComReg published Decision D12/12 which governs the prices for voice termination on fixed and mobile networks. The price control applies to all fixed operators with SMP in termination on their own network. Operators are directed to set prices for Call Termination services to recover only pure LRIC costs from 1 July 2013. This decision did not impact on revenues for the year ended 30 June 2013. The revised rates are set out below. Fixed Termination Rate (FTR)

as per D12/12

Maximum charge

per min

Maximum charge

per call

Euro cent Euro cent From 1 July 2013 to 30 June 2014 0.070 0.075 From 1 July 2014 to 30 June 2015 0.060 0.068 From 1 July 2015 to 30 June 2016 0.049 0.060

49

Explanatory Report - Wholesale Other Business - Wholesale Call Termination

In the decision ComReg indicates that fixed and common costs no longer recovered from Call Termination revenues can be recovered from other wholesale services. As a result of the direction, call termination revenue per minute will fall by approximately 80%. We expect the costs reported against this service must also fall – with a substantial proportion of the fixed network costs and common corporate costs formerly recovered from call termination moving to other wholesale services in future years. Trends in Reported Balances Revenues/Volumes

Overall this market is in steady decline due to the impact of fixed mobile substitution, competition, current economic conditions and alternative technologies on both the total number of channels supplied and the proportion of minutes originating on fixed lines. This is reflected in a 10% reduction in termination minutes. The combination of this 10% volume reduction and the 5% price reductions on 1 July 2012 led to an overall reduction in termination revenues of 15%. Operating Costs/Profit

Overall operating costs have declined by 6%. The small reduction in operating costs has little effect in mitigating the decline in market revenues, so operating profits have declined by 45%. Return on Capital Employed

The mean capital employed in this market declined by 11%. This reflects the shift in shared asset allocation away from legacy network platforms such as PSTN Switching and an underlying decline in the switching asset values.

Despite the reduction in capital employed the fall in operating profit resulted in a decrease in Return on Capital Employed to 7% from 11% in the prior year. Exceptional events/Methodology changes No exceptional events occurred in the year that materially impacted on the revenue or returns in this market.

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