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

Yes...they do look like buys...could be someone has got wind of some good news - or someone taking a position for the future... either way looks good

FF

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Received the above as an e-mail this evening.........makes interesting reading in my opinion.

Great stuff RAS, please keep it coming.

cheers GF.

Moving nicely first thing, lots of positive news on this company at present... Lots more potential?

Can someone explain to me why several large protected buy trades went through yesterday after 4.30pm and don't appear on yesterdays volume or todays trades!? I'm confused. 25million shares appeared as 'T' trades yesterday, but I can't see them today?

Help welcome,

Cheers
skids

http://www.marques-bros.com

From another site

Peter Dubens is either going to turn out to be a major tycoon or he isn't, but no one will be able to say he didn't try after Ukbetting's announcement of yet another acquisition while GX Networks, now called Pipex Communications, is just starting to digest Pipex.


Dubens is vice chairman of Ukbetting (UKB) and the former GX Networks (GXN) , both Citywire tips. His vision for both was to take advantage of all the millions of easily won pounds that had been poured into either poorly conceived or poorly run businesses at the height of the 1999/2000 boom.


Both companies have already made several acquisitions and yesterday Ukbetting bought Oddschecker for 4.75 million to add to its Sportinglife content business.


Ukbetting is also raising 11 million via a placing of 26 million new shares at 45p each. Dubens and chief executive Eric Semel are both investing 500,000 in the placing.


The remainder of the money is already earmarked for yet another purchase, which is likely to complete before Christmas. This would bring to eight the number of acquisitions made since the company floated on AIM in August 2001.


Oddschecker is a web site that pulls together all of the odds being given by the various bookmakers for a given horse race or sporting event onto one screen. Punters can then chose which odds they prefer and click directly through to that bookmaker's website to place a bet. Oddschecker receives a commission for each click through.


Dubens said that while it was not a huge acquisition in value terms, it formed a very important 'part of the jigsaw' for Sportinglife, the company's sports content business. As well as providing content and analysis on a standalone basis, Sportinglife also provides services to Ukbetting's own betting sites and to rival betting sites.


So far the company has a good track record of taking in the key bits of the businesses it buys and stripping out the rest. TeamTalk is a classic example of this sort of acquisition. Ukbetting talk the content part of TeamTalk and integrated it with Sportinglife. However, it jettisoned a radio business, a website and most of the employees that went with them.


In September Ukbetting announced the appointment of Trevor Beaumont, formerly Racing and Trading Director of Corals, as managing director of betting. Dubens said that while the company, as its name suggests, has to date taken most of its bets from the UK, Beaumont will introduce more betting from Europe.


For the six months to June the company reported turnover of 27.6 million and losses before interest, tax, depreciation and amortisation of 1.6 million. The drive now is toward profits before write-offs, Dubens said.


As Citywire reported, GX Networks, itself the product of Dubens' telecoms consolidation strategy, bought the larger Pipex, and internet service provider (ISP) and broadband company for a total of 55 million last month. The deal takes the number of customers to 140,000 from just 600 a year ago, and is a good demonstration of the extent of Dubens' ambitions.

Ukbetting's shares rose 4.5p to 53p yesterday and are unchanged today, valuing the business at 33 million, while Pipex dipped fractionally at 7.375p, unchanged today, valuing it at 131 million.


Citywire Verdict:


Citywire tipped GX (Pipex) in August at 5.625p and Ukbetting at 35.5p. Dubens is the complete opposite of a dotcom-era business builder. He is acquiring companies that have already benefited from millions of pounds of infrastructure investment, start-up costs, listing costs, advertising and brand building, for a fraction of their book value.


He is assembling highly experienced management teams with plenty of grey hair between them and ruthlessly stripping out all of the dotcom excesses.


Both Ukbetting and Pipex are in areas of business that should enjoy very substantial growth over the next few years, and while both may still be a gamble, they would appear to be gambles worth taking for now.


regards

rasool

Great report that Ras. Many thanks.

cheers Gf.

PXC being a tease this morning. WINS keep moving it up and then bringing it down again a few minutes later.

Plenty of buying and selling today, and a nice gradual rise - can it sustain the rise til close...

Good to see some action today - the trend is still very much positive. This could be the start of another upwards shift.
As ever I think we will see some large sells along the way as people lock in profits from the 4-6 pence range.
FF