The management of this telco network company have shelled out just short of 20 million on assets worth over 400 million, amazing. Please read the following report.

Many thanks to Brian for this excelent e- mail on the company.

If it's good enough for Warren Buffett ........
Published: 07:41 Fri 29 Aug 2003
By Joanne Wallen, Associate Editor,/b>


Alternative telecoms player GX Networks is defying all odds - it has just raised a further 12 million, made another acquisition and should be profitable 'very soon' thanks to the vice chairman's cunning plan - it's also in a sector that two US billionaire investors have bought into.

Peter Dubens is vice chairman of GX and also of ukbetting, and his strategy for both is the same. He is taking advantage of what he views as a unique moment in history to create two businesses that both become the beneficiaries of the massive over investment made by young companies in the past four years.

GX (GXN) today announced that it has acquired Firstnet Services, a similar telecoms business to itself, from Minorplanet (MPS) for 4.3 million. At the same time it has raised 12 million through an institutional placing of 261.9 million shares at 4.75p.

GX Networks was a private company that Dubens bought last year, before reversing it into AIM-listed Zipcom and changing the name to GX. The company bought two businesses that were virtually bankrupt and two more since that were 'not distressed' including today's acquisition of Firstnet Services from Minorplanet.

Dubens told Citywire that in total, these businesses have had investment of a massive 400 million, fuelled by the investment money being thrown around during the dotcom bubble. The opportunity comes from acquiring the expensive technology and infrastructure that this spending frenzy paid for, while chopping out all the excess costs and creating at a fraction of the original cost a viable business.

GX is a provider of telecoms and Internet hosting services to small and medium businesses. Another valuable legacy of the halcyon days is the long-term rental type agreement it enjoys with network owner Fibernet (FIB). GX is probably the sole survivor with a 25-year (now 23 years left to run) Indefensible Right of Use (IRU) agreement with Fibernet. This agreement effectively gives GX ownership of part of the network for the duration of the IRU. GX's previous owner paid some 11 million up front for the privilege, but it was an agreement that caused strange accounting anomalies among the carriers, and Fibernet for one stopped issuing IRU's.

Dubens says the IRU gives GX far lower capital costs than any other telco, since it is not responsible for maintaining the network for the next 23 years.

The idea therefore is to get as many customers as possible using the network, hence today's acquisition and the previous purchases of Transigent last October and Telenor Business Holdings' XTML and Compulink Information eXchange in July, each of which has been primarily for the customer base. The company now has some 20,000 customers and 44 million worth of billings.

Firstnet also adds some wireless and broadband technology and significantly increases the company's hosting capacity.

There is clearly significant duplication in putting these similar businesses together – call centres, management teams and the like, and Dubens and his team have already demonstrated at Ukbetting that they can be ruthless in stripping away unnecessary costs.

So after the devastation of the past few years, is there really still a viable business for an alternative telecoms operator? 'More so than ever,' reckons Dubens. He cites ukbetting's own situation as an extensive user of telecoms, spending some 700,000 a year on communications. The online betting site has leased lines, satellite links, virtual private networks and is absolutely dependent on having a service that can handle millions of bets coming through at the same time for a major sporting event. Dubens reckons small and medium businesses need a reliable alternative to the incumbents like BT, that can offer a more personalised service to their customers.

But he would say that. A more compelling reason to believe that there will be some winners in the sector is the recent investment by two well known billionaire investors, Warren Buffett and Carl Icahn.

Buffett, the traditionally tech-averse 'Sage of Omaha' emerged with a $20 million (12.7 million) stake in US telco Level 3 in May, while Icahn, a 67-year-old billionaire, took XO Communications out of bankruptcy in January and has since launched a $700 million hostile offer for bankrupt telecom provider Global Crossing.

Shortly after announcing his offer for Global Crossing, Icahn is reported to have said: 'This is like the railroads in the 1880's.'

Dubens himself is no slouch. As well as GX and Ukbetting he is a co-founder of Avocet Capital Management, a European technology hedge fund management business.

Two UK shrewd investors to have spotted the opportunity are A-rated Roger Whiteoak, with 4 million shares in the Framlington UK Smaller Companies Acc fund and also 45 million shares or 4.59% in the Throgmorton Trust (THRA). AAA-rated Patrick Evershed holds 0.51% for the New Star Select Opportunities fund.

GX's shares are currently up 0.125p at 5.625p, valuing the business at 56.6 million. If the company can break into profit any time soon, and the hunches of Dubens, Buffet and Icahn are right, now is the time to buy. Just remember this is still a risky business, and Buffett and Icahn at least can afford to lose a few shirts.ENDS.

Indeed risky but if all things go to plan just how big will the reward be.

GF

Still haven't bought shares in these yet. I'm waiting on their results.
What do people think share price will go to. Will they rise rapidly or will they decline?
Remember city reacts strangely these days to good/bad news.

Long term buy no matter what results are.

gf.

Interims out today, look good to me. Any expectation as to share price reaction or will this one follow the trend ie fair to good results = price drop?
full report here
http://moneyam.uk-wire.com/cgi-bin/articles/200309300700513227Q.html


Press Release
30 September 2003



GX Networks plc

Results for the six months ended 30 June 2003


GX Networks plc, the telecoms network operator and provider of business broadband solutions, today reports its results for the six months ended 30 June 2003.


Highlights




Revenues up nearly five-fold from 2.3 million to 11.1 million


Gross Margins increase from 15% to 40%


3 major acquisitions post period end


Stronger product set and enlarged customer base


Management and Board strengthened by new Chairman and new CEO


Current annualised billing of 43 million



Commenting on the results, Peter Dubens, Chairman of GX Networks plc, said: Good progress has been made in the six months to 30 June 2003. The Company that evolved from the merger of Zipcom and GX Networks 12 months ago has been totally transformed creating the base for the further three acquisitions made since the period end. We now have a cost efficient business capable of sustained growth in its core markets.


For further information:



GX Networks plc


Peter Dubens, Chairman
Tel: +44 (0) 20 7766 6909


www.gxn.net



Media enquiries:


Bankside

Henry Harrison-Topham / Ariane Vacher
Tel: +44 (0) 20 7444 4140

henry.ht@bankside.com
www.bankside.com

Well, the market seems to like it at the open. Bid is up a quarter point already.

Also, check out DDD. On the move - interims out today.

Just what the doctor ordered. Excelent results everything on track for a fantastic next 6 months. Really is a facinating growth stock and added to my positon this morning.

gf.

So what does it take to get it moving up? 80% buys this morning and apart from a few brief flirtations with 6.75 it's just sat at 6.5 where it's been for weeks.

What's your guys short-term target? say, one month

8.5p

gf

thanks. gf

SOME HOT STUFF HERE GUYS, that 8.5p might be a little bit low now. News just out.

e-mail from a city pal.

Tip Update: GX has more good news to come
Published: 16:24 Tue 30 Sept 2003

By Joanne Wallen, Associate Editor
Email to a friend


Citywire tip GX Networks has made good progress so far and we believe more good news is imminent, meaning there should still be time to get a piece of the action.

GX (GXN), formed from the merger of Zipcom and GX Networks, is a provider of telecoms and Internet hosting services to small and medium businesses.

The company has been acquiring companies that spent a lot of dotcom bubble money building expensive infrastructure, but then ran into financial problems. It inherited a valuable 25-year (now 23 years left to run) Indefensible Right of Use (IRU) agreement with alternative telecoms provider Fibernet, which effectively gives GX ownership of part of Fibernet's network for the duration of the IRU. GX's previous owner paid some 11 million up front for the privilege.

The game plan therefore is to get as much volume of traffic onto the network as possible to maximise the returns from a relatively low cost base.

Chairman Peter Dubens, also vice chairman of sports content and betting website ukbetting, told Citywire today that he was very pleased with progress so far, particularly with the broadening of the mix of services the company now provides.

GX is now billing an annualised 43-44 million, of which the amount coming from straight 'access,' in other words the provision of lower margin leased telecoms lines, has fallen to 38% from 60% while hosting has risen to 20% of the business from 6%. The company also offers broadband, wireless broadband, security and anti-virus software and resells hardware.

Turnover for the six months to June rose nearly five-fold to 11.1 million and gross margins improved to 40% from 15%. Losses before goodwill fell to 1.9 million from 3.3 million even after one-off restructuring costs.

Dubens said that as well as boosting the customer base, the recent acquisition of XTML, a web hosting business, has brought skills into the company in software from US giant Oracle, which in turn has enabled GX to win business from larger companies and local authorities.

There has been conflicting activity from two shrewd investors in the company this month. A-rated Roger Whiteoak sold 435,000 shares from his Framlington UK Smaller Companies holding, leaving it with 4 million shares or 0.31% of the now 84 million company. He also sold 3.3 million shares from the Throgmorton Trust, leaving it with 45 million shares or 3.53% of the company.

However AAA-rated Patrick Evershed added 3.1 million shares to his New Star Select Opportunities fund's holding early this month to take it to 8.2 million shares or 0.64%.

Shares are currently up 0.125p at 6.75p. Citywire tipped them at the end of August at 5.625p.

Citywire Verdict: As we pointed out last month, GX spotted a 'unique moment in history' to create a business that is the beneficiary of the massive over-investment made by young companies in the past four years – the combined investment in the companies now owned by GX is a massive 400 million.

In addition, two well-known billionaire investors, Warren Buffett and Carl Icahn, have recently, and atypically, invested in the alternative telecoms sector, Buffet in US telco Level 3 and Icahn in XO Communications while also bidding for bankrupt telecoms provider Global Crossing.

Citywire has heard that there could be more news from GX by the end of the week, which sounds like another customer-boosting investment on the cards. There are still plenty of risks attached in this sort of business, but profitability is apparently not too far off and the company has a lot going for it. Still worth a dabble.ENDS.

Still worth a dabble, your telling me.

gf.

Thanks for the posting GF. It sure is a good read. I know the management of the company pretty well and they all have a good head on their shoulders. I am a strong believer of this company.

gf, what do you base the 8.5p target on?

Bought for long term myself.Too many people look for quick profit exactly what the marketmakers are looking for(notice the way they have manipulated the price in the last two weeks) This company is buying large asset companies at cheaper prices expanding its own asset value and making itself a target for takeover by bigger companies in the same market.

Yes, I have bought GXN also for longer term as I also have of RTD.

Intend to hold both for at least 6-12 months and with GXN even longer maybe.

Hope both are at least double in price by then (esp RTD as i bought them at 13p!!!)

I do have confidence in both companies though and expect GXN to be several times its share price eventually

scotinvestor,thats exactly my outlook.

GX Networks gained 0.12p to 6.25p amid rumours that the acquisitive telecoms group has another deal in the pipeline - a 65m takeover of a web hosting unit once owned by disgraced telecoms group WorldCom.

hurrah!

At last a move above the 6.5p bid mark

We could see a RNS in the morning if the rumours have any substance - more aquisitions have always been the strategy so lets see if GXN have moved up a gear...

FF

At last! One of my shares moving up in the right direction.

A long term buy for me though so plenty of time to watch this baby grow.