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

Just started looking at this company, am i right in saying this company has no debt?

Jules99- no problem, your posts are always worth a read.

Mitch1967

Check:

http://www.uk.cmcplc.com/cfd/index.asp

I am attending 23rd sept programme - (and maybe also 25th sept) -it's free btw..

Jules99.

Jules99

Thanks for your help. I will surely have a glance.

Mitche1967

arv2168, well we will soon know results due any time. Thing is they have been so busy acquiring new businesses I cant really from the accounts available at the moment predict anything, but certainly know they have fibrenets network for free over the next 23 years. They have also had placings to raise money and have 9.5 million free cash on the books.

GF.

GX Networks PLC
16 September 2003


GX Networks Plc ('the Company')


The Company had been notified that, pursuant to their participation in the
placing of 261,894,737 new ordinary shares announced on 28 August, 2003, UBS AG
(acting through its business group UBS Investment Bank) had an interest in
236,200,000 ordinary shares of the Company representing 18.60 per cent. of the
issued share capital of the Company.


16 September 2003


This information is provided by RNS
The company news service from the London Stock Exchange


this should liven thing up

I rang GXN to find out when results due out - interim results are due on Sept 30th.....
Anna

Tipped in Investors Chronicle today.
GF

Excelent news GF just what I wanted to hear this morning...just bought a new batch b4 u placed this...was wondering why the movment!

Ta.

Jules99.

Here the IC article in full.

GX NETWORKS BUY.
6.25p - telecommunications - Profits are still some way off for GX Networks, but this year will see a substantial increase in sales as, with a strengthened management team, the company has gone on the acquisition trail. GX, formerly known as Zipcom, is developing a strong presence in the business-to-business data services market. Since last year, the company has bought five businesses and is one of the few in the sector actively acquiring.

But it's not a strategy without risks - the key to the process is in the timing. GX is buying assets that have incurred heavy investment, but have been written down in the wake of the dot-com bubble. By acquiring similar companies, the plan is to increase sales without significant additions to the cost base.

The latest acquisition is data services provider Firstnet, bought in August for 4.3m in cash and shares. Firstnet is already profitable and there is plenty of scope for GX to improve its margins. In the year to August 2002, Firstnet made 7.4m of sales, producing cash profits of 1.1m. The deal takes GX's customer base to over 20,000 small and medium-sized businesses and should mean significant levels of recurring revenues. Following the latest acquisition, executive vice-chairman Peter Dubens says annualised sales are now at 44m.

GX itself won't make profits in the near term. And the pace of acquisitions means that City research on the company quickly goes out of date - broker Collins Stewart's forecasts for 2003 take no account of the Firstnet acquisition. This pace may be maintained - a 12m share placing, which accompanied the Firstnet deal, sets GX up with enough working capital and/or a war chest for further deals. And according to Mr Dubens, more acquisitions are likely. A buy for risk-takers.
GF.

Nothing ventured nothing gained!
IN for long term GF...many thanks for IC post..


Caravaggio

Once again we see buys all morning (one sell since 9.45) and the price just sits there. Another protected order placing shares in the market?

It is up on th day..0.5p...ok so the heavens haven't moved but it still +8.4%

And more to come monday.

gf.

results not far now GF...

next couple of weeks will be interesting for GXN, especially with USB increasing their holding last week to 18.3%, big company news possibly on way, perhaps they are in the know?

good luck to evrybody this week.

Jules99.

Forgive me as I am new to this message board lark, but I have been following these messages for a week or so after purchasing some GX Net myself,

Can anybody give me useful advise about this company?

Host Europe. @ 1.38 pence
Although they had a fiery management reshuffle earlier this year, From the research I have done they seem to be a promising company to invest in. There should be some results out on Thursday, which hopefully will point toward a 1 – 2 M profit , They have an increasing market share with some large clients.
29th August shows a turnover of 466M shares , I think this was the ejected management severing their last ties?
Company report :- http://www.hosteurope.com/HostEurope2002.pdf

I am slowly trying to find my way with stock picking so any comments would be gratefully received.

Kev

Apologies for my ignorance but what are the implications of GXN's announcement today?

JF, nothing much as there are so many shares in issue already. By all accounts results due Friday. We should then get a clearer picture of what is happening.

GF

GF
Thanks but do you mean Friday as in tomorrow the 25th?
I rang GXN and was told they would be posting out interim results to investors on the 30th ie next Tuesday

Will they be announcing the interims publicly, do you know? I haven't seen a notification on the newswire.

Doug