ESAT Digifone, the Republic's second mobile phone operator, has moved into a net profit position for the first time in the three-month period to the end of September. Digifone's subscriber base increased by over 21 per cent on the previous quarter to 446,000. Confirmation that Digifone has moved into a net profit position came with the third-quarter results from 49.5 per cent shareholder Esat Telecom. In the three months to the end of September, Digifone increased its revenues from £31.5 million (€40 million) to £56 million, with net profits of £127,000.
Digifone has been reporting positive earnings before interest, tax and depreciation (EBITDA) for some time and had a positive EBITDA of £9.9 million in the third quarter. But the move into a net profit position even after heavy interest repayments are taken into account is a notable landmark for the mobile phone company, whose other 49.5 per cent shareholder is Telenor.
Esat Telecom itself also had a strong quarter, with gross billings up 71 per cent to £19.4 million and chargeable minutes up from 58.9 million in the third quarter of 1998 to 143.1 million in the latest quarter. EBITDA losses fell from £9.7 million in the second quarter, to £5.5 million in the third quarter.
In the nine months to the end of September, Digifone almost doubled its revenues from £79.8 million to £144.6 million and moved from an EBITDAbreakeven position to positive EBITDA of £20.2 million.
ABN-Amro analyst Ms Gemma Houlihan said that Digifone's average revenue per user - the usual method for comparing mobile phone companies - was substantially higher than the western European average at €58 (£46) per month. Ms Houlihan said that the strong EBITDA improvement for Esat Telecom reflected not just the improvement in the Digifone mobile business but also a substantial improvement in margins in Esat Telecom's fixed line business, where operating margins increased from 10 per cent in the second quarter to 25 per cent in the third.
This margin improvement was due to a number of factors, but Ms Houlihan said that the main reason was the lower level of leased lines from Eircom and the consequent increase in usage of Esat's own national fibre-optic network. By the end of September, Esat had completed 1,468 kilometres using CIE's national rail network and a further 228 kilometres of its own city network.
Esat chairman Mr Denis O'Brien said: "We have continued to improve our gross margins due to the extension of our interconnection nationally with Eircom and more importantly by switching on our national fibreoptic network."
