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

GXN, is a long term punt as I have always maintained. This is no big one day riser like YOO etc. Its a company run by good management who will make sure it brings home the bacon. Stick with it.

GF.

Moving up slowly but surely.

gf.

I've just got in from a long weekend so have missed all the 'action'.

was mildly suprised to see GXN down 0.25 but then had a look at the trades. Those late trades going through must be sells from this morning (sory not must be, I can only assume).

You have to hand it to the MM's they really are crafty b*stards, good luck to 'em.

Probably more of the same in the next few weeks, not forgetting some early profit taking.

2M shares in protected transaction buys at 8p in the last hour of trading. This is when the quoted offer was 7.75p.

What's that about?

well I thought they were probably sells from this morning. But if it's all part of one order then could they be buys?

price ticked down so i assumed they were just late reported sells from someone who had 'em at 2p...

Price ticked down just before they started coming in.

where have I seen that before?

price ticks up/down then a T trade goes through at mid price with a ? or is very close to mid price and reported as a buy when it's a sell or a sell when it's a buy.

Hi all

I am fairly new to dealing and am pleased to say that I brought these shares on the advise of all the people on this board. However would I be right in saying that when the new 443million shares admitted to trading on the 28th October the share price will drop? If so would it not be wise to sell a few days before and then buy back in? All feedback greatly appreciated

Martincoops

Don't ever buy shares on advice from bulletin boards. ALWAYS DYOR (Do Your Own Research).
Serious posters give opinions on what they think looks like a good bet for the future. (think and bet being the operative words)
Rampers give advice on what to buy.

Regarding the placement. I asked the same question and the reply was that the shares would have been taken up by large institutions and that the 28th is the date that they can sell them to joe public, if they wish.

Yes it generally is a good idea to buy low and sell high. ;-)

(apologies to who replied to my question,I can't look back through all the messages as my spuds are boiling over)

Since it didn't go up on Monday, any idea about this week?

you put your spuds in a sauce pan? what does your wife have to say to all this :-)

Well firstly it did rise this morning and like a lot of stocks lost ground later as the MMs decided the US outlook wasnt that good for the day.

Will it lose groung on the 28th, the answer has to be it depends what mood the MMs are in. Please dont bank on it lowering. I feel we will get a nice steady rise from here up to xmas. This is no YOO, and Im glad because that typeo f stock falls just as quickly as it takes off. This is a long term play. Not for speculators.

GF.

Martincoops, it's possible that the market has already adjusted the price to account for the placement which would account for the lack of movement yesterday.

quite worried. If this acquisition can't push the share futher, what else can?
still can't see a clear picture. anyone can? plz, appreciate.

umbrellaking just sit back and smell the coffee this is only going one way and that is up may go down short but will go up dont forget there are a lot of new shares floating about and maybe more by end of the year (-: if you are a short termer or a trader they are better plays out there.

HT aimhooc

Thanks, hightone.
It's just some higher in my head (or dream (-: ) maybe I'm impatient

well i was in at 4p and i am very happy to sit and wait you may find it tends to open up up or ticks up on a low volume day but i may have more breathing space than you but just think this time next year 20p or 2p i think nearer 20p aimhooc.

HT.

GX has established a very definite 6-month trading channel. Three times in the past six months the price has drifted sideways across that channel only to push up again when the lower support comes up to meet it. At that point the price moves up to the top of the channel and it starts again.

The latest jump into the 7-8p territory repeats that pattern so I think we can expect it to move sideways for a little while before moving up again. The aqcuisition makes thing more interesting but my feeling is that the share price has already factored in the new issue which, I'm led to believe, will bring a lot more shares into the market at the end of October.

What is certain to me is that if this company was worth 6.5p a month ago, there is no way that it is worth less now. I expect the next big move will have to wait until the next results come out which, what with the acquisition of Pipex, should show a positive cash flow and perhaps even a profit. Remember, at the moment this is still a loss-making company and that makes it a very speculative buy for most investors. As soon as the management show they can do something with what they've bought over the past year then the real interst should begin.

Doug

Right first of this post will either get you all hating me (and then I'll probably go hide for the winter ) or it will start of a good discussion on the merits of holding shares long term. I to I'm a shareholder of this company and it does "slightly" annoy me when people are asking "what is the share price going to be like next week" etc, who cares ! People should always buy shares as an investment and not to make a quick turn in a "week". Fine if you've made loads of money in a week, but think of the potential if you hold the share a little while. That my 2p worth. So if you now all hate me fine. But I'd just like to finish off saying that bulletin boards are for discussion and not everyone will hold the same opinion and views, and at the end of the day it's your money and your investment so who I'm I too.............................