RE: Telecoms Valuation - Time to buy15 Jan 2021 01:38
Interesting question, Indeed online is poor, they've recently re done their website, so maybe things might improve again. Although it still focuses on the wrong customers by advertising cheap FTTC as the header.
Prior to DMSL they spent and wasted alot of cash acquiring poor quality customers, those that brought on price on comparison websites. This is now killing them with bad debt, the writing was on the wall from day one. Expensive to acquire them, and even more expensive with them.
Without a sensible approach to the way forward I cant see any profit in the next 3 years. Whats a sensible approach?
Ditch all none direct debit low ARPU customers asap. Thats where your bad debt comes from.
Stop focusing on that business, just don't sell it,
For a PLC, Id probably reintroduce a channel model, but without an edge they cant move it.
Invest in some sort of hosted telephony to challenge the incumbents like they wanted to, plenty of options to increase margin on hosted and SIP, you don't have to resell Gamma/Horizon all the time. Dont go Broadsoft, do something different.
Bring in some good quality sales reps from competition, target less deals but large ARPU, Leverage the PLC status, big wigs like other big wigs. One deal for 200 seats is another world to selling an FTTC. Bigger customers, less support, less staff, reduced cost. Its easier to support one big customer than 20 smaller ones for the same revenue. They wouldnt need South Africa if they didnt sell to consumers and Micro SME which was Andys focus. Micro SME is sub £100 ARPU.
Probably look for further acquisitions, they cant go big for risk of RTO. So they have to stay sub £2m. I know of at least 6 under that threshold that being on the markets would assist in fund raises, and they could complete quickly. If they can do 2 or 3 quick acquisitions then they could turn it round. Theres at least one £10 Million Rev Telco on the market at the moment, Makes £2million Ebitda. Maybe its worth the RTO.
It needs £6 or £7 Million in TO to general profit, DMSL revenue will never grow, If BT give them the territory unless they gain territory they are stuck with the same customer base on long 5 year commission cycles from BT. Therefore the focus has to be on proper revenue growth from their own billing. Use the margins from easy wins on the BT side to pay for the better deals on their side.
A private Telco on £7 Million should be making 10% Ebitda at the very least. Of course PLC costs equate for probably £450k so its a breakeven target. However their contract notice RNS's scream small fry, until they mention a ££ in one, you know its small.
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