Strong economic growth with the consequential rise in demand for telecommunications services, market deregulation and a reduction in costs should result in the ESAT Telecom Group moving into profit in the year 2003.

NCB Stockbrokers is forecasting that the telecommunications group should generate pre-tax profits of £8.6 million for 2003 followed by £23.9 million for 2004, £44.4 million for 2005 and £64.6 million for 2006. Profits before interest and tax and depreciation (EBITDA) should turn positive in the year 2001, according to NCB.

The liberalisation of the Irish market should create significant opportunities for ESAT whose potential market will increase from £225 million to more than £1,100 million in 2002 and a forecast £1,600 million in 2007. As the first competitor to Telecom Eireann in the market and a strong growth company, ESAT is well placed to increase its market share.

The market is expected to grow by 8 to 12 per cent per year well into the next millennium. The group's wholly-owned fixed line subsidiary, ESAT Telecom, should produce a positive EBITDA in late 2000 if it makes a favourable interconnect agreement with Telecom Eireann later this year.

Dramatic subscriber growth should make 45 per cent subsidiary ESAT Digifone EBITDA positive this year and pre-tax positive by the year 2002.

NCB forecasts that while average revenue per user will fall due to increasing competition in the mobile phone market but that this will be more than offset by growth in subscriber numbers. ESAT Digifone can take 40 to 55 per cent of all new subscribers and increase its share of the market from 21 per cent in 1997 to 38 per cent by 2002, NCB forecasts.

But it will not be all plain sailing. The risks include growing competition in the market particularly from larger players. This will put pressure on prices and on market shares. Esat Telecom will require further financing in 1999 and beyond when existing cash balances and proceeds from the latest secondary offering have been used up while ESAT Digifone will need funding in excess of that already negotiated.