Esat Telecom Group incurred net losses of £9.3 million for the three months to June 30th, down from £11.7 million for the same period last year. The results follow losses of £40.1 million in 1997.
Esat said yesterday the decrease was mainly attributable to a reduction in losses at Esat Digifone, the second mobile operator in which it has a 45 per cent stake. This, it said, reflected the ongoing increase in Digifone's subscriber numbers.
The results also show that Esat has been hard hit by the continuing round of price cuts on international calls by Telecom Eireann. Esat has had to reduce its prices in response and this has reduced its margins.
The company's chief financial officer Mr Neil Parkinson said the group would continue to lose money until it got a better interconnect rate from Telecom. This is the amount Telecom charges to either originate or terminate calls for Esat customers.
This is a bone of contention between Esat and Telecom. Esat is awaiting a ruling from the EU on the matter and the Telecommunications Regulator will introduce new rates before the end of the year. Mr Parkinson said he expected the EU ruling next month. A lower rate, he added, would greatly improve Esat's financial performance.
The results show that gross billings for the quarter increased by more than 100 per cent, to £8.1 million, up from £4 million for the same period last year. Revenue increased by 145 per cent to £6.5 million.
However, the overall increase in billable minutes was partially offset by a decline in the amount charged per billable minute. In response to Telecom's price cutting, the average gross billings per billable minute declined by 4 per cent from 17.2p to 16p this year. According to Esat, it was also affected by "the ongoing acquisition of a higher percentage of lower priced and lower margin inland long distance traffic".
The number of Esat customers rose by almost 40 per cent, to 3,957 by the end of June. This compares to 2,666 customers in June 1997.
The group's customer base was enhanced and gross losses, running at 11 per cent, were maintained at the same level, partly due to gross profits recorded by Esat Net and the recently acquired BridgeCom group.
Sales and administrative costs rose sharply to £4.5 million, an increase of 109 per cent, over last year. Esat said this reflects the significant expenditure the group has made in management and personnel to help it develop its fibre optic networks and to develop its products.
"This increase also reflects the inclusion of a full quarter for EU Net following its purchase in November 1997," it says.
Esat said it had built fibre optic networks in Dublin and Cork, totalling 105 kilometres and expects a further 10 networks in Dublin, Cork, Limerick, Galway and Waterford to come on stream by the fourth quarter of the year.
It also expects to complete a national backbone fibre optic network by the second half of 1999, using the CIE rail network. The deal, first mooted over a year ago, has been completed, according to Mr Parkinson.
The results show that Esat Digifone had revenues of £26.6 million for the three months to June 30th, compared to £3.98 million for the same period last year. At that stage the company was trading just over three months.
It had operating expenses of £25.8 million in the three months to June, compared to £13.8 million last year.
Net losses were £4.4 million, compared to £12.2 million last year. Its total liabilities are £120 million and it has shareholders' funds of £12.8 million.
Mr Parkinson said the group was extremely pleased with Digifone and added that nobody had thought it would generate such positive revenues so quickly.
Commenting on the group's results, Esat chairman, Mr Denis O'Brien said the greatest news for it was that it will now be able to compete in the residential market from December 1st.
