Tesco Mobile, the UK's largest virtual mobile network operator, has breached covenants on its £600m debt facility after a reporting shortfall, City AM can reveal. The breach relates to the company's financing agreement with the Royal Bank of Canada, which underpins the purchase of mobile devices and network contracts.
The company’s finance arm confirmed the breach has been waived and is no longer an event of default. Tesco Mobile called it a “minor administrative issue,” with the breach self-identified and reported internally. It did not explain the error in detail, but said it was unrelated to the company’s overall financial position.
In April, the company extended its debt facility, increasing borrowings from £485m to £600m and pushing the maturity date out to 2033. This came after a period of growth: Tesco Mobile reported a 4.7% rise in revenue to £1.1bn and turned around a loss to post a £1.2m profit for the latest period.
Customer numbers now stand at 5.7 million, down from prior years due to falling prepay sales. The company attributed this to market pressures and shifting customer behavior, even as postpay revenue grew.
Tesco Mobile's joint owner, Virgin Media O2, faces its own financial hurdles, with £22.4bn in combined debt and lease obligations, of which £8.6bn is due before 2031. In May, VMO2 reported a 3.8% drop in customer revenue, citing ongoing competitive pressures and reductions in its customer base from the previous year.