1st Mar 2006 07:02
Alternative Networks plc01 March 2006 Alternative Networks plc Trading update As referred to in our AGM Statement, Alternative Networks, one of the UK'sleading independent business to business telecoms providers, is today pleased toannounce continued encouraging financial performance and commercial progress inthe three months to 31 December 2005, the first quarter of its financial year toSeptember 2006. Trading was in line with market expectations during the period and the Board isconfident about the prospects for the remainder of the financial year. Acquisition update The integration of the ICB acquisition, announced on 11 October 2005, isprogressing well. As we announced at the time of the acquisition, the company had 14,180 mobilecustomers and 518 fixed line customers as at 30 April 2005. At 31 December 2005, ICB had 14,141 mobile subscribers, and 538 fixed linecustomers. In the three months from 1 October 2005, the company added net 411mobile subscribers. The back-office functions have been consolidated and we have successfullycompleted the first bill run under the Alternative Networks brand name, andusing the Alternative Networks billing platform. The acquisition of ICB is expected to deliver annualised cost savings of morethan £0.6 million following the redundancy program, which has now beencompleted. In addition, the Group is already benefiting from economies of scalewith suppliers as ICB used the same suppliers as Alternative Networks. The Board will provide an updated estimate on the potential deferredconsideration (capped at £5m) along with the Interim results due to be publishedin June 2006. Trading review The mobile base of the Group continues to grow strongly, adding 2,058 newsubscribers in the three months. Total mobile subscribers were 35,888 at 31December. Since that date further progress has been made and we expect mobilesubscribers at the year end to exceed our target of 40,000, which we set at thetime of the ICB acquisition. Mobile churn in the first quarter was below 20% on an annualised basis acrossthe Group, (24% in the year to 30 September 2005), reflecting the initialsuccess of our initiatives in 2005 to encourage both longer term contracts andthe early renewal of contracts with existing customers. For example, we haverecently renewed a contract with a customer, Securitas Security ServicesLimited, extending it for 3 years. This customer has 450 connections, splitequally between Blackberry and voice only connections. The Group recently re-signed a long term service provider contract with VodafoneUK, that runs to 31 December 2007. The customer base and the revenues in the Network Services (fixed line) productsremained stable in the first quarter, with the growth of wholesale line rental("WLR") revenues a continuing highlight. In the three months to December 2005,the monthly recurring revenues of WLR increased 10%, and this is expected tocontribute to a return to net sales growth for the full year, also helped as themasking effect of the delayed impact of the Ofcom mobile termination cuts in2005 unwinds in the latter half of 2006. After the first quarter we reviewed the penetration of the WLR product, andbelieve there is still plenty of opportunity for further growth in sales tocustomers taking outbound products from Alternative Networks, as evidenced bythe fact that more than 40% of the Group's larger existing fixed line customersare not yet taking our WLR services. Gross margins have been in line with expectation across the business during theperiod, despite continued price competition and the recent M&A activity in thesector is likely to be positive for Alternative Networks as it continues to seekto procure best of breed wholesale products from suppliers at competitiveprices. We continue to benefit from our low capital expenditure business model in theperiod. The principal investment has been in our customer management system.This is a three phase project: - • Phase 1 will provide an enhanced customer database, being provided byPivotal, as well as provide an on-line billing and reporting system for theGroup. This is currently undergoing extensive trials and will be complete inMarch 2006; • Phase 2 will focus on managing the sales cycle, and the furtherdevelopment of an extranet for our customers, and will be implemented in 2006;and • Phase 3 is connecting the core databases of the Group to externalsuppliers and customers. The total cost of this system is forecast to be less than £1 million. We expectcapital expenditure for the year to September 2006 to be approximately £0.85million. Alternative Networks continues to seek earnings enhancing acquisitions, whichwill add significantly to our customer base and/or enhance our productcapability. We look forward to the future with confidence. 1 March 2006 Enquiries: Alternative Networks plcJames Murray, Chief Executive Officer 0870 190 7444 Edward Spurrier, Chief Financial Officer College HillCorinna Dorward 020 7457 2020 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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