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Author: northbridge Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 4815  
Subject: All very quiet Date: 19/03/2003 22:06
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It's all been very quiet on here recently. So here are a couple of observations and some recent press information I've picked up. First, today's 36p closing price is a new low in the KCOM share price, a fall of 50 per cent since its high of around 72p before the results in January 2003. I know people will say it's the war etc but I wonder about this with KCOM. Looking across the sector, most competitors are trading a fair bit above their year low. Not too much I know, but bearing in mind KCOM's advantage with their Hull network, that's not a good sign. The news coming out of KCOM hardly helps. The recent kinbusiness wins have already been flagged up in the results announcement, a signal of some desperation I would have thought to announce them again. Let's face it a deal with Twickenham and the War Graves Commission are hardly significant national deals.

Which brings me on to a second point. A colleague and fellow KCOM investor was passed a copy of a magazine called Utility Week while visiting a client this week. Who should be on the front but Steve Maine, with a tempting headline - Plugged into the Maine. The lengthy interview inside is rather strange. Hope you don't mind if I ramble on a bit here, but I was fascinated.

First up, he talks about how sentiment has affected the sector and how investors are shunning telecoms as a whole without picking the future winners. Now this doesn't quite ring true when you consider, from my take on things, that KCOM has actually performed worse than the sector in the last quarter. Anyone with the proof to the contrary welcome here.

Then he talks about how prudently he has managed the business, neglecting of course to mention that he has sunk the best part of £100m? into KIT with negligible return. Then he repeats the disastrous PR line from his results about BT and the competition, and to cap it all now calling for "more intrusive regulation in the UK."

He must have been delighted then when Oftel announced this week that they would be more intrusive, by forcing KCOM to open its Hull network to other internet service providers at wholesale rates.

http://www.oftel.gov.uk/press/releases/2003/pr11_03.htm

See point six. Personally, I think this news, bearing in mind the very poor reputation of KCOM's karoo service will be welcomed by local internet users with open arms. Bad news for a network business that still pumps out the cash but is standing still growth wise.

He then says he's looking forward to significant changes in the regulatory regime when Ofcom comes along. What does Maine propose? Further opening up of kinhull to competition so the cash generating core starts to lose money? I bet they can't believe it at Oftel, an open invitation to dismember the last telecoms monopoly in the UK.

He then talks a little about inbusiness, where he signals a retreat from big corporate accounts and a focus on small businesses. Anyone in business will tell you this is a real cutthroat market with endless resllers offering silly deals on cheap calls. He even says "we are putting less of our energies into chasing large accounts." He says redundancies cannot be ruled out. Then there's classic bit about the "maturity" of KIT meaning it now has a natural fit with the local business.

There's a brief mention that KCOM has looked at mergers but nothing has come of it. Finally, when you hope he's going to deliver a massive endorsement of his national business plan, he blows it by saying KCOM's future is around broadband, multimedia and content management.

Forget the Hull business and kinbusiness, it's all about KIT and kinmedia from now on. Combined turnover of £3000m versus £11m, profits of £17m versus huge and ongoing losses.

All in all another huge PR coup for KCOM. Upset Oftel so they retaliate by opening up your monopoly, tell the world your main growth driver is reversing out of the market because it's too aggressive for it and then say it's more of the same lossmaking multimedia rubbish for the forseeable future. It's disheartening to see the same old self-inflicted wounds every time this man appears in the press. What corporate investors must make of this sort of coverage I can't imagine.

My prediction? Big profit warning before the annual results with Maine stepping down. Finance man to take over, KIT shut down, kinmedia sold off, kincontact shut or sold, lots of job losses. Big acquisition then or merger with Thus.

As I said, sorry to ramble on, but it's so quiet on here recently.

northbridge




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