Tele2 puts Irish arm up for sale

Tele2, the Swedish telecoms group, has put its loss making Irish arm up for sale. It has circulated a memorandum detailing financial and customer information to other industry players.

By last September, it had 40,000 customers, who have been spending an average of €24 a month with the company. It is selling 13 million minutes a month. The document predicts that its revenues for 2005 will be €9.1 million, and it has gross margins of 28 per cent of €2.6 million.

The memorandum points out that the Irish arm has accumulated a "significant level of tax losses" in the business. Its ultimate buyer may be able to write these off against its profits.

The company says that its losses stem from the cost of recruiting customers during its first year in business. This included a seven-figure sum spent on advertising and marketing. Tele2 contracts out most of its operations, including billing and customer care, and as a consequence, employs just seven people in the Republic.

All of them are based at its offices on Capel Street, in Dublin's north city centre. This office is held on a short lease that is due to expire at the end of December.

Tele2 provides local, national, international and fixed-line to mobile services. It operates by selecting the cheapest available carriers for its calls. When it launched here in late 2004, it predicted that it would be able to undercut existing Eircom call rates by up to 77 per cent. The company has a basic business strategy that is founded purely on competing on price with established providers.

Tele2 is a publicly-listed company in Sweden and has a presence in Britain, France, Russia, Scandinavia and Spain. When it launched here last year, it had 25 million subscribers across Europe.

In August, it pulled out of the Finnish market, claiming that it was too competitive. The company said it was unable to sell local calls there.