Mobile joy for Tesco

TESCO IRELAND’S grocery and household sales might have dropped by 3.9 per cent in the first quarter but its mobile subsidiary appears to have turned a corner.

Latest accounts for Tesco Mobile Ireland Ltd – a joint venture with O2 Telefónica – show that its losses narrowed in 2010 to €700,000 from €4.4 million in the previous year.

Revenues almost trebled to €10.6 million – the result of cash-strapped consumers switching from other carriers to Tesco’s low cost pre-paid plans in the recession.

Every little helps and all that.

Tesco Ireland doesn’t publish its mobile subscriber numbers but I’m told it will break the 100,000 barrier in the next few weeks.

It’s my understanding that by the end of this year, Tesco hopes to have 140,000 mobile subscribers here.

The supermarket giant had 35,000 mobile customers at the end of 2009.

So four years after its launch, the business appears to be gaining some momentum in what is increasingly becoming an overcrowded marketplace.

At an operating level, Tesco Mobile almost washed its face last year, recording a loss of just €8,000. This compared with an operating deficit of €3.9 million in 2009.

It was dragged further into the red by a “finance expense” of €673,000 relating to borrowings from Tesco and O2.

The accounts state that the division is due to repay €6 million of its €13 million shareholder loans in 2010 and the balance next year.

Tesco Mobile had net liabilities of €11.4 million at the end of 2010.

Tesco has upped its game in mobile here.

It has simplified its product offerings and enhanced the range of handsets, recently introducing smartphones.

As a next step, it will launch billpay into the market in the fourth quarter of this year.

This will begin as a trial in a number of its stores before being aggressively marketed in 2012.

Mobile has been hugely successful in the UK for Tesco, where it has 2.6 million subscribers. It encourages customer loyalty.

After a slow start, it now appears to be gaining traction in Ireland. More importantly, it should make a profit this year.