Privatisation: Learning from the Eircom debacle
The potential for self-enrichment around the privatisation of public assets is high. It can operate at many levels. The scale of money involved in privatisation can be so large that even a small shaving off the margin can give huge sums to 'insiders'.
In the Eircom debacle, one change in ownership cost over €200m in transaction costs in 1999 or €240m in today's prices. So even if trade sales (straight sale to another company) cost less, it is reasonable to estimate that the transaction costs of the company's six changes of ownership probably cost around €1 billion. And at each turn, a small number profited handsomely.
It is clear that the Valentia consortium made almost €1 billion net out of their ownership. The ESOT has made over €750m in cash payments, own lots of Vodafone shares and still owns 35% of the company.
Conversely, a lot of people lost money. Certainly a large proportion of the 600,000 people who bought shares on privatisation lost one-third of their money. As a consequence, 'popular capitalism' is dead in Ireland.