Last night's news about Dixon's in the UK signing up 475,000 Internet subscribers led me to ask who'd get the business behind the scenes.
Tonight's FTprovides the answer:
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WEDNESDAY NOVEMBER 18 1998 UK & Ireland
ENERGIS: Telecoms operater plugs into demand
By Alan Cane
Energis, the telecommunications operator in which National Grid has a majority stake, havled its interim losses and improved margins as demand for advanced data services from business customers grew sharply.
The shares rose 11p to 870p as the market absorbed the implications of new customer accounts, including DHL, Renault and Whitbread, and the success of Freeserve, Dixons' internet service provided in conjunction with Energis and its Planet Online subsidiary.
Mike Grabiner, chief executive, said the results indicated the company was accelerating in a strongly growing market. Turnover grew 76 per cent to £121.7m in the half year to September 30 .
"Growth in demand continues to expand rapidly, especially for the broadband advanced voice and data services for which our network is designed," he said.
Earnings before interest, tax, depreciation and amortisation were £19.4m (£2.1m), while the loss before tax was cut from £39.2m to £16.1m. Losses per share were 11p (16p).
Mr Grabiner said revenues from advanced services, including frame relay, virtual private networks and other forms of data transmission, more than doubled to £55.4m.
He said Dixons, which has attracted some 475,000 customers for its Freeserve internet connection offering in eight weeks, had changed the way the UK internet market would operate.
Mr Grabiner said Energis could be interested in bidding for a licence for third generation mobile phone services, due to be auctioned next summer, but it would act as a member of a consortium rather than on its own.
It was also looking at ways of connecting directly to customers including wireless, which could lead it, in the long term, to seek residential customers for the first time.
Comment
Energis is growing quickly in a fast-expanding market, where demand for data services is beginning to outstrip capacity. And its network is well suited to the "data wave". Furthermore, initiatives such as MetroHoldings with Deutsche Telekom and France Telecom and Dixons' Freeserve have shown its management's imagination. Turnover of £275m-£280m (£168m) for the full year is eminently attainable, giving ebitda earnings of about £45m (£16.1m). The shares remain a couple of pounds off their all-time high of £11.22. Given the group's growth prospects, any downside seems limited.
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Dow Jones' version:
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November 17, 1998
Dow Jones Newswires
Energis Confirms 475,000 Users For Freeserve ISP
LONDON -- In just two months, the U.K. market for Internet access has been turned upside down.
Electronic goods retailer Dixons Group PLC (DXN) has attracted 475,000 customers for Freeserve, Britain's first free Internet access service launched two months ago. That puts it in second place to AOL, which has 500,000 customers, and ahead of Compuserve, which has 400,000.
If Dixons calculated that free Internet access would jump start PC sales in its stores and could eventually be profitable on advertising and transaction revenues, it still needed substantial telecoms network capacity. For this it turned to Energis PLC (ENGSY), which operates a national advanced voice and data network strung along the electricity network of National Grid Group PLC (U.NGR).
"I think (Dixons) have changed the model of the way the Internet operates in the U.K.," said Mike Grabiner, chief executive of Energis, speaking Tuesday after the telecoms group reported that pretax losses for the six months ended Sept. 30 fell by more than half to GBP16.1 million as sales jumped 76% to GBP122 million.
"I think it's very early days (but) we've got real early mover advantage in a rapidly growing market," Grabiner said. "I think it could grow very fast now."
Energis' main source of revenue from Freeserve comes from calls over its network at between 0.3 pence and 2 pence per minute, depending on the time and day Internet access is provided.
About 1.8 million Britons have Internet access accounts, a figure that's risen 10% since Freeserve began offering access in September.
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For anyone who may have forgotten, here's the news from the original NN/Energis release:
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11/06/98
Energis And Newbridge Sign New Five-Year Agreement Valued At US$130 Million
Energis and Newbridge Networks have today signed an agreement under which both companies will align their data strategies for the future. The deal includes a contract valued at US$130 million for ATM switching equipment and related services as well as the formation of a five-year ‘Partners in Data' agreement. This extends the two companies' existing three-year relationship in the development and deployment of advanced data services.
By working together on current and future products, Energis and Newbridge will ensure that the multiservice data network corresponds more exactly to the service requirement of Energis' customer base. Energis was the first carrier to launch an ATM service in the UK marketplace and has already deployed ATM and frame relay solutions for customers including The Mirror Group, Boots, and the BBC's digital television network. Through Energis' extensive customer base, Newbridge will benefit from the ability to assess and respond to emerging trends in data requirements.
"The demand for sophisticated data services is growing rapidly," said Geoffrey Cheetham, Director of Marketing at Energis. "Under ‘The Partners in Data' agreement we gain the most advanced switching solutions on which Energis will be able to build innovative new services that will match the requirements of both existing and potential customers."
Alan Lutz, President and Chief Operating Officer at Newbridge Networks, said: "We are delighted to further deepen our relationship with Energis, which has already proved very successful. The closer co-operation between our two companies will enable us to meet the changing demands of corporate customers today and in the future. Increasingly, customers want flexibility, low cost of ownership, migration, low operating costs, and a degree of future proofing. Energis' creative approach to services, combined with the Siemens / Newbridge industry leading ATM platforms, and network and service management systems, will continue to deliver truly innovative business services for customers."
Energis' data services centre around the Siemens / Newbridge MainstreetXpress 36170 Multiservices Switches and offer business customers unique value in meeting their communications needs for internet, intranet, data, voice, and video applications. These data services are supported from the Energis operations centre by sophisticated network and service management based on the Siemens / Newbridge MainStreetXpress 46020 Network Manager, which ensure the highest service performance levels.
ENDS
Notes To Editor
Energis plc, the telecommunications company focused exclusively on the business marketplace, built its national network primarily along the National Grid's electricity pylon infrastructure. With over 5000 kms of fibre optic cable installed throughout England and Wales, a capacity sharing agreement with Scottish Telecom and an international licence, Energis offers businesses a full portfolio of national and international services. These services include innovative telephony services, advanced frame relay and ATM for data transmission and enhanced voice services, such as local rate, national rate and freephone.
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