Eircom DB scheme reports €433m deficit
IRELAND - Eircom, Ireland's largest telecoms provider, has revealed a €433m deficit in its defined benefit (DB) pension scheme.
In its quarterly and half-yearly results to 31 December 2008, Eircom - which is 57.1% owned by the Australian investment company Babcock & Brown Capital Limited (BCM) - stated while financial performance had been "relatively steady" over the period, "pressures on revenues and profits are growing".
The results statement confirmed the company had reported a "goodwill impairment charge" of €720m in the second half of 2008, which it said reflected "the pension deficit at 31 December 2008 and the deterioration in the Irish economic environment and the outlook for the business".
Eircom figures showed the value of the DB scheme fell from €2.75bn in June 2008 to €2.14bn by the end of the year, and although liabilities also decreased from €2.73bn to €2.58bn, over the six-month period the scheme had slipped from a €20m surplus to a €433m deficit.
The company said the fall in the funding position of the scheme reflected "the sharp declines in stock markets", and confirmed it will be "addressing necessary steps to remediate this position".
That said, slides from the results presentation showed the value of employer contributions to the pension scheme more than halved during the year from €17m in 2007 to just €8m in 2008.
In addition, the company reduced the discount rate used to calculate liabilities from 6.25% to 5.75%, while the assumptions for salary/pension increases also fell from 3.5% to 2.5% although the assumed rate of return on assets for the period remained at 7.4%.
The report also noted the group's pension commitments are funded through separately administered superannuation schemes and are accounted for using the 'corridor' approach, "which leaves some actuarial gains and losses unrecognised as permitted by IAS 19".
As a result the statement noted because of the use of the 'corridor' approach "the charge for the six months ended 31 December 2008 does not reflect the movements in the assets and liabilities of the pension scheme since 1 July 2008".
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