ESAT Telecom has recorded a sharp increase in revenues for the three months to the end of June, but losses have also risen compared to the same period last year. The results show that Esat Digifone, of which the company owns 49.5 per cent, is performing extremely well.
The second-quarter results show the company's turnover increased to £15.87 million (€20.15 million), compared to £8.1 million (€10.28 million) in the same period last year. It made net losses of £28.3 million, compared to £9.3 million last year.
Esat, which is the Republic's second largest phone company, attributed its losses to continued investment in developing new products and services, expanding its customer base and telecommunications infrastructure. The company spent £21.4 million during the quarter on the continuation of its network roll-out.
Esat's chief financial officer, Mr Neil Parkinson, said the results were in line with expectations. He said Esat's gross margin had improved partly as a result of getting better interconnection rates from Telecom Eireann and the introduction of new products. (Interconnection rates cover that part of the call which Telecom delivers on behalf of Esat).
He said the margin would improve further during this quarter and thereafter.
He said most major cities in the Republic are now connected to the Esat network. This means the company can deliver more calls over its own network, obviating the need for leased lines and providing cost savings, according to Mr Parkinson.
Billable minutes increased by 140 per cent to 122.1 million, compared to 50.8 million for the same period in 1998. Customer numbers rose to 7,886 in the second quarter. This includes the contribution from Bridgecom, a data networks provider which was bought last year, and the company's entry into the small office home office marketplace.
Mr Parkinson said Esat, which recorded a net loss of 72p per share, is expected to turn earnings before interest, tax and amortisation positive by "the back end of next year", and make a profit by 2002-2003.
He noted that this quarter's results included a foreign exchange loss of £6.3 million on its loan notes because of the fluctuation in the euro/dollar exchange rates. Esat Digifone, in which Esat has a 49.5 per cent stake, recorded a net profit of £356,000 in the three months to June 30th, just two years after its launch. It also increased its revenues to £48.5 million in the three months to June, from £26.6 million last year.
Digifone now has more than 367,000 subscribers. Mr Parkinson said this increase was mainly in the pre-paid category.
To date, the Esat board has authorised £286 million to Digifone to build out its network. Esat said Digifone needed further funding to develop its business and had reviewed the alternatives available. However, Esat did not anticipate any further funding from Esat this year.
Digifone entered a financing facility with AIB/ABN Amro for £112 million.
The group also incurred exceptional costs of £1.7 million. Of this, £1.5 million was spent on Esat's abortive bid for Cablelink and a further £200,000 gaining a listing on the Dublin Stock Exchange.
On EsatClear, the company's Internet and residential service provider, Mr Parkinson said it was on track to have 25,000 customers by the end of 1999.
