Esat Digifone' losses increase to £27.49m

Losses at Esat Digifone, the mobile phone subsidiary of Esat Telecom, increased to £27.49 million (€34.91 million) last year, from £21.7 million in 1998, according to accounts lodged with the Director of Telecommunications Regulation.

The company, whose parent was sold to British Telecom for £2.5 billion last January, recorded sales of £222.15 million, up from £117.66 million a year previously.

Digifone's gross profit rose to £100.64 million from £43.88 million in 1998. But when expenses, depreciation and amortisation were included, its operating loss before interest was £21.61 million.

One of the sharpest cost increases was for an "exceptional item-management incentive scheme", on which Digifone spent £33.99 million. The scheme cost £3.65 million a year previously. In a note to the accounts, the company said the charge was based on a programme to provide additional compensation to key executives, based on increases in its value. "The scheme will crystallise on the occurrence of certain events, including a change in control of the company," it said.

The company, which now has some 700,000 mobile phone accounts, rivals Eircom's mobile subsidiary, Eircell, which has in excess of a million subscribers. The document published yesterday disclosed that Digifone paid more than £2.54 million to the Norwegian firm Telenor, a 49 per cent shareholder, for the supply of SIM cards, technical support and other services. When BT acquired Esat, Telenor sold its stake to BT. Digifone also paid £2.39 million to its parent company in relation to the supply of leased line capacity and other technical services.

Esat Telecom's founding chairman Mr Denis O'Brien was paid £10,000 in rent for the lease of a phone mast site. Mr O'Brien is also a director of Esat Relays Ltd, a company which Digifone paid £27,000 in rent for the lease of another mast site.

Directors' fees were static at £128,000, although payments for "other services" amounted to £268,000, up from £147,00 in 1998. Digifone's directors at the end of 1999 included its chief executive, Mr Barry Maloney, the businessman Mr Dermot Desmond and Mr Leslie Buckley.

The accounts also revealed that Digifone will have paid more than £10 million when its acquisition of two mobile phone retailers is completed.

The document said Digifone would ultimately pay £5.2 million for its acquisition of O'Hagan Technology on November 23rd last. The consideration was £2.7 million in cash with a further performance-related provision of £2.55 million. The fair value of the assets acquired was £33,000, with goodwill valued at £5.17 million.

Digifone's 1998 acquisition of Cellular World Ltd., another phone retailer, cost £2.1 million cash. A further performance-related consideration of £3.75 million was payable on December 31st, 1998. This was revised to £5.7 million at the end of last year.