Tesco Mobile profits fall as revenue surges

Profits decreased sharply at UK retail giant, Tesco’s mobile business in Ireland last year in spite of revenues increasing by 58% to €34m

The joint venture business between Tesco and O2 Ireland was established in October 2007 and new figures returned to the Companies Office for Tesco Mobile Ireland Ltd show that the firm recorded a pre-tax profit last year of €286,000 after profits of €5.37m in 2011.

The sharp drop in profit arises mainly from administrative expenses more than tripling from €5.64m to €17.1m. The firm’s revenues during 2012 increased by €12.5m from €21.5m to €34m.

The latest figures from Comreg show that Tesco Mobile now increased its market share to almost 4% of the mobile phone market based on revenues by the four operators in the sector.

According to the directors’ report for Tesco Mobile Ireland “the key elements of the operation worked in line with the plan. The market continued to be very competitive during the year with the other networks continuing to promote aggressive price plans”.

On the firm’s likely future developments, the accounts state that “the company has grown its share of the prepaid mobile market in 2012 by leveraging its simple value for money offering.

It continues: “The company launched a pay monthly proposition into the market place in October 2011. The company has based its business plan on continuing to grow market share in 2013.”

The filings confirm that the company received €11m for financing its launch and expansion and had drawn down the full €11m by the end of 2010. The report states an additional €2m was drawn down during 2010 and €6m of the €13m loan was repaid during 2011 and remaining balance was repaid in 2012.

The report states that “accordingly, the directors believe that based on financial projections of the company and if necessary, financial support from its shareholders, the company will have sufficient funding for its operating requirements for this period and therefore consider it appropriate to adopt the going concern basis in the preparation of the financial statements”.

The figures show that the firm recorded an operating profit of €563,000 last year compared to €5.95m in 2011. At the end of December last, the firm had a retained deficit in shareholder funds of €5.9m. This was made up of accumulated losses of €8.5m and “other reserves” of €2.5m.