Small Talk: In the era of the cloud, Telecity has every chance to fly

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The Independent Online

Telecity has long been a favourite of stock market speculators. The company runs vast data centres where companies can house their telecoms, internet and IT infrastructure, and is often mentioned as a possible target for a bigger peer looking to expand its footprint in this lucrative sector.

It wasn't always so. The bursting of the dot.com bubble at the turn of the century was nothing less than disastrous for companies like Telecity. But that was then. The internet, it turns out, is no fad, and demand for online services has rocketed. And as businesses strove to be better connected, Telecity regained its composure. Today, its data centres provide cost-effective ways for companies to plug in without taking on all the costs of setting up the right technology infrastructure from scratch.

The march of cloud computing, where applications and services are hosted remotely and accessed using high-speed networks, has only added to the lustre. The change in fortunes was evident in Telecity's update last week, with the company, whose share price has increased by leaps and bounds in recent years, confirming its "outlook for another year of substantial growth in 2011".

Investors had already received an indication of market trends back in March, when rival group Interxion, which competes with Telecity in the data centre space, issued an update. As Collins Stewart analysts noted at the time, "there is still an ongoing imbalance in supply and demand, in which demand growth continues to outstrip supply growth".

Eyeing this gap, Telecity chief executive Mike Tobin says the business is on the lookout for targets within its existing markets, and in new territories in Europe.

"We are doubling our entire footprint over the next three years," he gushed after the update. "But in addition to that there are opportunities, if we can get the right deal at the right price, for bolt-on acquisitions of facilities in existing markets as well as new markets in Europe."

It certainly has the firepower, with the company announcing that it had secured an additional £100m of debt availability from its lenders, thus expanding its total credit facility to £300m.

"Looking forward, there is still significant growth for us to capture, both in our existing markets [and] in new markets in Europe, as the internet continues to grow and the cloud increases in significance," Mr Tobin says.

And what of the prospects of Telecity itself being taken out? Market rumours have mentioned Equinix, though the speculation has died down in recent months. But bid or no bid, Telecity looks set to scale new heights.

Range Resources scours the globe

oil and gas prospectors look high and low in their search for resources. But – at least as far as the small and mid-cap space is concerned – you would be hard pressed to find one with the kind of spread boasted by the aptly named Range Resources.

The last time this column looked at the Alternative Investment Market-listed group, it had interests in the Puntland region of Somalia, Georgia and Texas. It has since gone into Trinidad, and last month announced plans to buy out the 90 per cent it did not already own in three producing oilfields on the island.

All this comes as the company moves closer to spudding an exploration well in Georgia in June – the first of four to six exploration wells pencilled in for 2011 across Range's assets in Georgia, Puntland and Trinidad.

As Range's executive director Peter Landau says, the company, which is also listed in Australia, is "never criticised for a lack of activity". But, is it spreading itself too thin? That would be true if it had an operational part to play in all the various projects. But it only has such roles in Georgia and Trinidad. With the latter, Mr Landau adds that the acquisition comes with an established drilling inventory encompassing everything from the experienced rigs to the right kind of personnel.

Analysts don't seem worried either, with Edison Investment Research saying that the Trinidad deal "has the potential to materialise as another savvy Range acquisition". Investors must be pleased.



The cost of listing on Aim

while the pace of price rises in the wider economy has picked up, there is one area where the rate of cost hikes has come down, according to the accountancy firm UHY Hacker Young.

It claims the cost of listing on the Alternative Investment Market has climbed by less than 1 per cent over the past year – well below the average 5 per cent rise in fees in each of the preceding four years.

UHY pins the slowdown in price hikes to increased competition among advisers, who have been vying with each other to grab a bigger slice of the action in growth company listings. Overall, the firm reckons that the price of listing is now around 7.3 per cent of all funds raised.

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