Colt Telecom unveiled a strategy yesterday to return the network business to growth but at the same time announced earnings had fallen 23 per cent in the third quarter from £43.3m to £33.4m.
Jean-Yves Charlier, the chief executive who was appointed in August, said the "Future in Focus" strategy would accelerate revenue growth, deliver positive cash flow and profits and re-establish the company's reputation as an innovator. He said: "We want to serve the pan-European requirements of larger companies but there is a sweet spot in the market for us to focus on national customers and small and medium-sized companies. The new strategy will focus on connecting buildings that are 100 yards away from our fibre network."
The latest results, however, showed the company was suffering from rising costs and increased price competition across Europe. M. Charlier stressed that Colt's new strategy with its greater emphasis on local markets would not add further costs to the business. He also said Colt had learned to live with increasing price competition.
"There is overcapacity in the market like a lot of industries," he said. "We are seeing tough trading conditions and we saw them last year. It's not determining our plans for the future. We include this price erosion in our model. It's probably not going to improve, if it does it gives us upside. We are being fairly grown up about it. Customers are going to go for the best price in the market place.
He said Colt, which is 58 per cent owned by Fidelity, was not expecting to be involved in the much-predicted consolidation in the telecoms network industry. "We fundamentally believe in our strategy and we are focused on being an independent player. We don't believe in consolidation in the market place," he said.
Results for the third quarter showed turnover up 7 per cent to £303.7m compared with the same quarter last year, but earnings before interest, tax, depreciation and amortisation (Ebitda) were down 23 per cent to £33.4m. Losses for the period were £31.8m compared with £35.7m.
Barry Bateman, Colt's chairman, said the fall in Ebitda was primarily due to price erosion and rising costs. This latter item was related in part to increased investment in India where the company is planning to transfer about 200 jobs but has yet to complete the transition process. M. Charlier predicted costs were likely to start to fall from the fourth quarter.
Colt also announced that it was repaying £324m of bonds early, which would save it £18m in interest payments over three years. "We wanted to decrease our interest charge. It was a real good financial deal. We have a lot of cash in the bank. We feel very comfortable about the business," M. Charlier said.
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