Is Tesco Mobile Ireland in trouble?

Tesco Mobile Ireland – which like its UK sister operation is a joint venture between Tesco and O2, managed to rack up a deficit of €7.3m by the end of last year, according to the Irish Times.

The paper reports that the operation, launched in mid-2007, has just filed accounts at the Companies’ Registration Office (CRO) – Ireland’s equivalent to the UK’s Companies House – which show the deficit on the balance sheet as of December 31st last year, compared with a €3.1m deficit at the end of 2007.

So can we call that figure a loss? Not exactly. Whilst the accounts do say the operation made a loss in 2008, as it’s classed as a small company it only has to file a balance sheet and not a full profit and loss account. The Irish Times did ask the same question, and a spokesman for the venture said they ‘would not elaborate on its performance last year, and did not provide any details on the number of subscribers that it has recruited.’

According to the accounts, the shareholders (Tesco and O2) stumped up €11m in July 2007 to finance launch and development. The venture spent €2.5 million of this in 2007, and €6 million last year, a total of €8.5 million. This leaves €2.5m in the kitty. Not a great deal in the grand scheme of things.

So is Tesco Mobile Ireland in trouble? Maybe not quite yet. Tesco and O2 have agreed to provide ‘last resort’ funding to the company until at least 30 June 2010. But that still leaves the issue of the €8.5m it has spent so far – and whether it can repay O2 and Tesco. The accounts show the €8.5m was provided in the form of interest-free unsecured loans, of which €1.5m must be paid by December 31st 2010 and the remaining €7m by December 31st 2011.