Key facts
- Tesco Mobile breached the terms of its debt facility with the Royal Bank of Canada.
- The breach was identified as a reporting shortfall.
- The lender has waived the breach, and it is no longer considered an event of default.
- Tesco Mobile characterized the issue as a minor administrative problem.
- In April, the company increased its debt financing to £600m with a maturity date extended to 2033.
- Tesco Mobile reported revenue of £1.1bn and a profit of £1.2m in its latest accounts.
Tesco Mobile, the UK's largest virtual mobile network operator, has breached the terms of its debt facility with the Royal Bank of Canada. The breach occurred due to a reporting shortfall, according to City AM. The company's finance arm, which arranged the facilities, stated that the lender has waived the breach, and it is no longer considered an event of default. A spokesperson for Tesco Mobile described the error as a "minor administrative issue" related to reporting requirements, which the company identified and self-reported. The nature of the reporting breach was not disclosed but is understood to have no bearing on the company's financial health.
In April, Tesco Mobile extended its debt financing arrangements, increasing the amount borrowed from £485m to £600m and extending the maturity date to 2033. The telco arm of Tesco, founded in 2003, operates as a virtual network operator using the O2 network. In its latest accounts, Tesco Mobile posted revenue growth of 4.7% to £1.1bn, achieving a profit of £1.2m after a prior year loss. The company noted that market pressures and changes in customer behavior led to a decline in prepay customers, partially offsetting postpay growth, resulting in a total customer base of 5.7 million.
Virgin Media O2, the joint owner of Tesco Mobile, itself has significant debt and lease obligations totaling £22.4bn, with £8.6bn due before 2031. Virgin Media O2 recently reported a 3.8% drop in customer revenue, attributing it to customer reductions in prior years and ongoing competitive pressures in the consumer fixed market.