Irish Business News, July 17, 1998

Eircell profit soars despite presence of competition

by Brian O'Mahony
COMPETITION is good for the bottom line, the profit figures from Eircell for its last financial year strongly suggest.
Results just published show that the state-owned mobile phone operator boosted profits by 238% last year.
For the year to April 2, 1998 Eircell's profits rose from £1million to £3.3m while turnover rose 30% to £209m from £160.5m.
Eircell's figures are based on a near 50% rise in its customer base, achieved in its first full year of competition from Esat Digifone.
Eircell's boss, Stephen Brewer, said the group's focus on both people and in its networks paid dividends.
"We have proved that we are innovative, commercially driven and committed to the highest possible industry standards," declared Mr Brewer yesterday. "Our commitment to investing in customer care is reflected in the employment of an additional 110 staff, primarily in our customer care centres in Dublin and Dundalk."
Customer base has been the driving force in the group's growing profitability and the numbers using the network have shown a steady increase from the first year of operation to date.
Back in 1993/94 slightly more than 50,000 mobile customers joined the network. Within two years of that date the figure had edged up towards 150,000 and by the end of the last financial year the 44% growth increase resulted in that figure rising by another 126,0000 new customers to bring the total numbers on the system to over 400,000.
Last year was Eircell's first full year of operating with competition from East Digifone and the figures suggest that instead of damaging Telecom the Esat challenge has driven the Eircell business up with it.
Eircell was forced to innovate and as a result introduced Ready to Go, the prepaid service available on both Digital and GSM systems.
By the end of the year the Ready to Go service had generated 100,000 handset sales.
With the advent of the second mobile phone franchise the market has been remained remarkably strong for Eircell.
This is due to the high market penetration achieved in the early years of the service which is now 16%. This is better than the UK and already on par with the European average which went mobile long before Ireland did.
Some European countries are much higher than 16%, with Norway well over 20% but market analysts expects Ireland to do as good as Norway in the coming years.
By the year 2000 at least one million Irish people will own a mobile phone.
And as the third competitor enters the market it is expected that prices will be forced down significantly, bringing costs to the consumer to more realistic levels.

Prospects for Celtic's Russian gold venture look promising

by Brian O'Mahony
VERY little of Celtic Resources' potential value is reflected in the group's share price at the moment.
Celtic is a gold play in Russia.
This is its only major project right now. In the heart of the Republic of Yakutia, unheard of by most in Western Europe, Celtic sees a potential that it may well yet deliver on.
Reports into the mine in which Celtic is a 50% partner suggest the signs are positive.
The mine in question is believed to be a repository for 1·24 million ounces of gold and the potential source of a further 6·3 million ounces of gold.
This region in the remote Republic has a proven record of gold mining.
The present mine, say the experts, has been rubber stamped by the Russian parliament (Duma) for a production sharing agreement, which means Celtic's share in the mine is secure.
Celtic is currently in the process of a raising $2·5m to take its interest in the mine a step further.
This will be the commissioning of a full feasibility study to develop the mine and to delineate the extent of the reserves even further.
The latest assessment of Celtic Resources says the shares are worth a flutter.
Even on modest value being placed on the gold reserves in this Siberian republic, analyst Job Langbroek of Davy Resources says it would double the share price from 8·3p to 16p.
But when the current price per ounce of $7 is taken into account, the value added to shares would be of the order of 56p.
Mr Langbroek, who works for Davy Stockbrokers, believes the upside on the stock is significant with minimum downside, given the current modest share valuations on the company.
Under managing director, Sean Finlay, Celtic has moved from being a diversified resource based company in 1996 involving disparate oil and gas interests acquired from Dragon Oil. The company is now highly focused however and those who have a stomach for a long shot investment might well consider Celtic.
Those who have gone in the past for Tuskar in Colombia and Bula Resources, in another little known state, were caught hopping.
However Mr Langbroek's assessment of the business suggests the Celtic venture is worth serious consideration.

Tourist support centre opened

by Mark Gallagher
A £3 million tourism investment programme in the Cork/Kerry region reached its completion in Bantry yesterday, with the opening of a new tourist support centre.
The centre is one of 10 opened in the region within the last year.
The centres are basically one stop shops, which not only raise the profile of tourism in a specific area, but also to help tourists remain there once they have arrived.
The centres, which have opened in towns throughout the region including Dingle, Skibbereen and Youghal, are strategically placed so any prospective tourists cannot miss them upon entering the town.
"To maximise the potential of tourism on a regional basis, we must have the proper support infrastructure in place so we can properly market the full range of local tourism products," Minister for Agriculture Joe Walsh said opening the centre.
"This impressive tourist centre, located in the refurbished Courthouse Buildings, will play a vital role in marketing the range of tourism products available locally. It will further help develop Bantry as one of the key tourist destinations in the South West."
In 1997, the Cork/Kerry region attracted 1·3 million domestic visitors and 1·5 million from overseas. They contributed over £450m to the local economy, positioning the tourism sector as one of the largest employers in the region.
The facilities not only provide visitor information, accommodation and ticket reservations but also banqueting and entertainment booking.
The programme was funded by the ERDF Operational Programme for Tourism, Bord Fáilte and Cork County Council.

Some ground recovered

STOCKS regained some ground yesterday following the London market.
The Irish Stock Exchange Quoted index closed at 5426·54 points adding 35·99 points overall. Investor's looked for bargains amongst the financial stocks, Waterford Wedgwood and Elan.
AIB traded up all morning pushing to an intra day high of 1125p, but came off the boil in the afternoon, closing at 1124¼p, up 12p.
Bank of Ireland slipped to 1500p in the first trade of the day, but recovered in the afternoon to close up 2p at 1517p.
Irish Life shares continue to drop closing at 689p down 5½p. The tightly held Hibernian Insurance also fell 35p to finish at 730p.
Industrials were also mixed, CRH stayed flat trading at the day before's closing price of 1040p. Smurfit Jefferson was bid up to 202p in the afternoon but fell back in a late trade down below the 200p barrier closing at 196½p, down 3½p.
Greencore shed 2p to 392p. Irish Continental added 40p to close at 1190p. Clondalkin regained ground closing at 610p, up 8p. Green Property announced a successful bid for Trafford Park but stock fell 15p to close at 505p.

Smurfit row over redundancies

SMURFIT bosses have refused to comment on reports that voluntary redundancies and cuts in overtime payments and bonuses are to be implemented at its corrugated casing plant at Togher in Cork city.
Details of the proposals were put to the plant's 149 employees this week and further meetings are scheduled between management and staff representatives.
Workers are unhappy with the proposals, claiming the redundancy packages, on offer to around 25 staff members, are unsatisfactory and that they face a drop in earnings if the new pay structure is introduced.
A spokesperson for SIPTU, the main union involved, also declined to comment, saying negotiations with the company were at too early a stage.