eircom ESOPTrustee

•elRCOmManaging employee share ownership

On 4th January 2010, STT completed their acquisition of eircom Holdings Limited, the formerBabcock company that owned 57.1% of eircom. It resulted in Emerald Communications (Cayman) SPC ("ECC'')becoming the top company in the eircom Group structure. As part of the transaction, eircom ESOT exchanged itshareholdings in ERCIE SPC for equivalent shareholdings in ECC.

eircom faces a challenging future in uncertain economic times. The company has Significant debt, and there is aneed to invest in technologies for the future in the fixed, broadband and mobile markets. Having a Governmentpolicy that encourages investment and an appropriate regulatory regime are key to delivering the next generationnetworks & services that the Irish economy need.

The ESOP board is aware s :

and rumour circulating about -distribu tion will occur. Thenormally react to specularion ""'-bearing in mind what it hasExtra 20 and 21, it wishes 0 L=.=':"';;::

position.

We believe eircom is a viral eneconomy As a major sharehowell positioned to input into UCLCLU.-'!

determine the future direction of eirrrxnultimately how this impacts on the ==- -ecurity of its employees and pe io ..

perhaps the most challenging time '- ---,- r--twenty years.

The ESOP board believes that i 'it take a careful and considered videvelopments in eircom, uch as possibleinvestment plans, debt restructurinbefore making any precipitou decisi ~a duty of care and a responsibility to an .prudent and considered manner and -0 IlI<:Ui.i;..a.Iil

the high standards that it has consistenover the past ten years.

The board is equally aware that it will need to takeome decision on the next Distribution during the

course of the year, and at the appropriate timeit intends to do so. The ESOP board mdecide on the question of further inves en-eircom.

Both these decisions are not mutually exa re,but the resources to do either or both are '~- .

ensible and prudent therefore rhar e i:»board has all the necessary information <£'. '- ,:.

"hen making such decisions. Foremregard is the company's business pia: '- ' plan, which is currently under p: the company, will lead to the determiaazjoa

of new capital requirements of eircom'ard. The ESOP board intends 0 concccr

ment of the implication that '. -ess plan when that is completed.

The ESOP board, as before, will take the necessarylegal and financial advice, as it is obliged to do,in relation to the foregoing before arriving atany decisions. Ultimately such decisions mustbe balanced, prudent, and in the best interest ofeircom ESOP beneficiaries.

. h to see the ESOP continue to have aSJLiLf~'C role and influence in eircom for themreseeanie future and to seek to get the best

o investment over the medium to- rerm. The vast majority of beneficiaries,

- er retired or not will continue have a veryteresr in eircom remaining a financially

secure company for many years toe.

e ESOP has delivered impressive returns forbeneficiaries to date while also maintainingan ability to input on key strategic decisionsthat affect the direction of the company andi financial stability. Its credentials in termsof delivering for beneficiaries are second tonone and it will strive to do the very best bybeneficiaries over the remainder of its lifetime.

In the meantime, the ESOP board will continueto work with the other shareholder to developgreater clarity around the key business issuesoutlined above. When we have a betterunderstanding of these, the board will be in amuch better position to make informed decisionsabout what is in the best interests of beneficiariesand what actions it should take in regard tomaking further Distributions

ESOT Assets June 2009v's May 2010*

ECC Ords ECC Prefs Vodafone Cash

• Un-audited.

Movement in value ofVodafone shares during

FY to 30 June 2009

The following report provides an update on the ESOT andAPSS results for the Financial Year ended 30 June 2009.Key Results

Distributions to the value of €69.7 million made tobenefictaries.ESOT acquired 49_6 million ERCIE SPC Preference Sharesin a Rights Issue

Impairment to ESOT's 35% investment in eircom of€193.8 million*

ESOT Borrowings reduced by €13million

Dividend Income down 46% to €7.7 million

Expenditure down 1.4% to €3-9 million**

At the end of the financial year the ESOT's et Assets totaled€154.27 million, reduced from €432 million in the prior year. Thereasons for this are as follows :

The requirement for ESOT to reflect the impact of an impairmentcharge reported by eircom in its half-yearlyaccounts to 31December 2008, in its own accounts for the financial year 2009.

The ESOTdistributed Shares from the Trust Fund to the value of€69.7million during the financial year; and

Movements in the Vodafone share price and Sterling-Euroexchange rate .

As indicated in ESOP Extra 20, the ESOT borrowed €49.6 millionin a short-term loan in]une 2009 to subscribe for 49.6 millionERCIE SPC Preference Shares in a Rights Issue. The ESOT repaidthese borrowings from proceeds of the BCMIH Preference Shareredemption on 30 ]une'2009.

2.25million Vodafone shares continued to be held in the APSSon behalf of 1,896 beneficiaries. The ESOP Unit can assistbeneficiaries who wish to arrange to have these shares transferredto them or sold on their behalf.

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Recent months have been a very b _-period or the eircom Board and Executive Committee.

The arrival of STT as a long term - - ic shareholder has heralded a new period in the company's history.

We have established a new et of worki practices to create a productive working environment with themanagement team.

The most important issues which we shareholders continue [0 addres include;

• The development of a realistic. a ievable and investable plan for the future, based on a clear strategy;• Identifying areas where we can • -e custorne more effectively at lower cost;• A new integrated organisation bringing together our fixed and mobile networks and IT as one;• The creation of a stakeholder ap 0 position eircom as a trategic business within the country;

Ensuring that the way forward the furore 0 me pension scheme;• Strategic options to addv the 0 our balance heet;• Putting a management [earn in place - - relecom experience as well as promoting talent from

within the organisation

eircom continues to operate in a market with compe , , -eoeconomic and recessionary pressures, and is focused onreducing it'S cost base so a to become more compeuuve.

It is intended to compete more aggres ively acro all egrnents of the marketplace and this is reflected in thelaunch of ext Generation Broadband ervices. new mobile internet propositions and cloud computing services forcorporate customers.

This is a very tough agenda", ith many elements both intemallv and externally to be put together if we are to reacha uccessful outcome for the busin going forward, eircom _Ianagernent have presented to the ESOP Board onaspects of the business and this will continue during the year.

Recent months have been a very b _-period or the eircom Board and Executive Committee.

The arrival of STT as a long term - - ic shareholder has heralded a new period in the company's history.

We have established a new et of worki practices to create a productive working environment with themanagement team.

The most important issues which we shareholders continue [0 addres include;

• The development of a realistic. a ievable and investable plan for the future, based on a clear strategy;• Identifying areas where we can • -e custorne more effectively at lower cost;• A new integrated organisation bringing together our fixed and mobile networks and IT as one;• The creation of a stakeholder ap 0 position eircom as a trategic business within the country;

Ensuring that the way forward the furore 0 me pension scheme;• Strategic options to addv the 0 our balance heet;• Putting a management [earn in place - - relecom experience as well as promoting talent from

within the organisation

eircom continues to operate in a market with compe , , -eoeconomic and recessionary pressures, and is focused onreducing it'S cost base so a to become more compeuuve.

It is intended to compete more aggres ively acro all egrnents of the marketplace and this is reflected in thelaunch of ext Generation Broadband ervices. new mobile internet propositions and cloud computing services forcorporate customers.

This is a very tough agenda", ith many elements both intemallv and externally to be put together if we are to reacha uccessful outcome for the busin going forward, eircom _Ianagernent have presented to the ESOP Board onaspects of the business and this will continue during the year.