MmO2 writedowns see losses hit #10.2bn

MmO2, the parent of mobile firm O2 Ireland, reported a full-year loss of £10.2 billion sterling (€14.3 billion) yesterday following a massive writedown on the value of its assets.

The firm, which is the fifth-biggest mobile group in Europe, wrote down £9.7 billion in assets,more than half of which related to the purchase of third-generation (3G) mobile phone licences.

MmO2 also wrote down £1.3 billion of the value of O2 Ireland - almost half the £2.5 billion that British Telecom paid to buy Esat Digifone in 2001.

Ms Danuta Gray, managing director of O2 Ireland, said the decision to make the asset writedowns was prudent and reflected best accounting principles.

Shares in MmO2 closed up 0.5p at 55.75p in London yesterday following publication of its full-year financial results to the end of March 2003.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose to £859 million in the year to March 31st, 2003, from £433 million the previous year - at the upper end of expectations.

Total group revenue rose 14 per cent to £4.874 billion.

Mr Peter Erskine, MmO2 chief executive, attributed the writedowns to network roll-out delays caused by shortages of "unreliable and expensive" 3G handsets and regulatory UK price cuts that hurt earnings. The company's carrying value of the 3G licences is now about £4 billion.

Meanwhile, O2 Ireland generated turnover of €686 million in the 12 months to the end of March, up from €640 million last year. EBIDTA increased to €239 million during the period, up from €198 million last year.

For the first time, O2 published figures detailing average usage at its three European subsidiaries.

O2's Irish subscribers use their mobiles for an average of 188 minutes per month. This compares with just 107 minutes per month for O2's British customers and 109 minutes for O2's German users.

Mr Darragh Stokes, managing director of Hardiman Telecommunications, said O2 Ireland's profit margins of 36 per cent compared to a margin of just 27 per cent in Britain, suggesting it was not passing on the benefits of these economies of scale to users.