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

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.............................

Very unfair rtagd. After all we have all seen in the recent past, firms do have a loyalty to share holders an example Marconi so why should share holders have a loyality to firms. If you can make a profit and get out then good luck.

Ok washlander, but I did mention in my post that if you've made a lot of moneyin a week,then why be happy with a little short-term profit. I also did mention to think of the potential if you hold on to the shares a little longer........... But (and no I'm not back tracking here !) as I also mentioned in my post that at the end of the day it is your money after all.

Hi rtagd / washlander,

Just to add to the debate, some will buy and hold shares for the longer term goal and some will buy long for short term goals. It all depends upon the target for the investor. Me, I have a short term goal to buy out another persons 22.9% equity holding in my property and a long term goal to be wealthy enough to retire. Therefore, I loose all sentiment in companies and my trading decisions are based upon a combination of the buying and selling signals of MACD, RSI & Bollinger Band indicators and then checking out the fundamentals and news threads.

GXN looks good to me (particularly because of Pipex) and the indicators signaled me to BUY on 1/10 hence the reason I did. I am holding because the MACD is above it's signal line and the RSI indicator is rising above 50 and Bollinger Bands of the RSI are diverging (wide). I'll keep holding whilst these three indicators are true unless daily price fluctuations breach a 5% stop loss at which point I will be alerted to sell.

Works for me.

It should be pointed out that most Telecom and Datacom related shares are speculative at the moment, therein lies the potential to make greater profits (and indeed losses). The UK is... and has been the Global test-bed for these industries over the past ten years or so. First starting with CATV and co-axial distribution networks and now with major fibre optic rings around the country. The problem is that the latter technology has not realised even one tenth of its potential which is primarily due to end user take-up. At the moment these "rings" are primarily used to form part of Global mesh networks which ensure connectivity to any shore they touch, however the main source of custom is based primarily other telecom or data carriers along with banking and financial institutions. Pricing is keen in order to attract and maintain such clients and safeguard revenue streams.
The lager issue may be distribution of services (ie connectivity to the rest of us) where in many cases stripped out BT exchanges can be utilised to travel the last short distance. If you were BT would you invite the competition in?. This will have to change, and new end user technologies (in developement) will require higher speed and bandwidth capabilities for which the major routes already exist.
However these many companies have to survive until such time that these requirements arise.
I suppose in a long winded way I am saying look at most of this sector as long term. Short term gains are worth-while but also be prepared for the worst. "Remember about Free lunches etc".
These are purely my own opinions and should taken as so, as I only aspire to play devils advocate on this one.

Why buy shares presently when 000,000s have been bought @ 6.25p. Their will be a stock overhang for a long time to come. If you don't think that institutions will take a guaranteed profit you are living somewhere else. The price and
spread will reflect the 44m.waiting to be dumped from 28th. Oct. onwards. Look at Easynet from 150 to 116 after Moni's sale. Time to buy is later.OIMO z

ziblot, that is correct but why sell at 8p when you may get 10p or more for them. Instituions are under pressure to perform, but they aint going to throw bargains away not at the present price.

GF

Offer price just gone up to 8.25 - have been watching as a little nervous with the 443 million shares being issued 28th Oct - taken note of your posting GF

.....and bid up to 8 .......