Few companies would go the stock market while still recording substantial losses. But such is the nature of the telecommunications business that investors are prepared to put in their money in the hope of future profits, rather than on the basis of the existing bottom line. Esat Telecom could turn a profit in about three years time, its chairman and founder Mr Denis O'Brien said yesterday. The company, which competes with Telecom Eireann in the corporate sector, published results which show the competitiveness of the market in which it operates and the heavy capital investment required. It announced a trading loss of £3.6 million for the six months to June 30th last. Revenue increased by almost 4 per cent to £5.1 million, compared to £4.9 million for the six months to June 1996. And the company reported a significant 70 per cent growth in "billable minutes" in the first half of this year. However, the extent of competition was shown by the decline in the average revenue per billable minute by 38.8 per cent, from 20.1p per minute to 12.3p per minute in the six months to June last.
Among the reasons for this squeeze on margins are that it had to respond to Telecom Eireann's price reductions and that it had gained a higher percentage of lower priced and lower margin inland long distance traffic.
Its customer base is strengthening. Esat had 2,666 customers at the end of June, an increase of 87 per cent on a year earlier. It now provides a service to approximately 19 per cent of its current target market of firms - those with long distance monthly expenditure of over £200.
As well as trading losses, the need for heavy capital investment in both Esat Telecom and in the Digifone network is increasing the red ink in the short term. The company's net loss was £19.9 million in the first six moths. Overall it invested a very substantial £9.3 million in Esat Digifone in the first six months. Mr O'Brien said that if the company "stood still" it would probably be making a profit already. He underlined the substantial investment in building its own infrastructure to prepare for the opening of the residential market in 2000. "We are rolling out three to five years capacity now and the cost is significant," he said. "We are building a telecommunications company to compete with Telecom in every sector of the market."
