Easynet Plans UK Expansion

Easynet announces expansion of local loop unbundling and broadband consumer services, corporate customer wins, and trading update

July 1, 2005

4 Min Read

LONDON -- Following on from Ofcom’s positive support of local loop unbundling in the U.K., Easynet Group plc announces today plans to extend its local loop business by:

  • Extending its LLU footprint by up to an additional 100 exchanges (c.350 in total), reaching 5.8 million homes and 850,000 businesses in the U.K.

  • Investing further in the infrastructure required to serve the wholesale market

  • Expanding its direct consumer business through UK Online;

Chief executive David Rowe commented: “We are pleased with the progress that Ofcom is making in supporting the local loop market in the U.K. We have also seen strong progress in our own plans to develop our consumer broadband proposition, UK Online, and our wholesale broadband proposition, LLUStream. To support these initiatives we are investing additional funds (capital and operating expenditure) in order to significantly enhance capability in these areas to cater for expected additional demand. This will allow us to leverage our existing network and local loop infrastructure, with rapid payback, and provide an additional source of growth and profits for the company.”

Investing in mass market infrastructure

During 2005 the company is investing in additional capacity and capability to service the rapid increase in consumer broadband customers, both through our indirect, LLUStream, and direct, UK Online, channels. This includes automated systems to work seamlessly with BT, as well as additional network and provisioning resources.

Local Loop expansion in the U.K.

Easynet will extend its local loop footprint by up to 100 exchanges during the next 12 months giving it coverage of up to 350 exchanges covering approximately 5.8 million homes and 850,000 UK businesses. The additional exchange roll out will be based on visibility provided by pre registrations from UK Online and wholesale customer demand. This extension will also support the Company’s current leased line replacement and VPN services.

Wholesale Services

The Company is encouraged with its progress in the wholesale arena, having already signed up several ISP’s including Freedom to Surf, Spitfire Communications, E7Even, and EFH Broadband. We expect full commissioning during Q3. It is expected that new customers will be earnings enhancing once connected. Demand for the service is strong.

UK Online

UK Online is the company’s own brand broadband consumer service, which was launched during April 2005. The initial growth has been encouraging with approximately 10,000 new customers achieved by mid June 2005. UK Online utilises Easynet’s local loop infrastructure, which provides a low cost route to market as well as a strong platform to develop unique market propositions. The market for Broadband is growing fast and new next generation services are expected to further stimulate the market. The company is expecting to offer speeds of up to 24Mb in the second half of the year. Investment in UK Online includes additional marketing, customer support, and initial customer set up.

Trading update

The company’s corporate business continues to perform to plan. Further to our last update we have secured significant new additional customers in the first half of the year, including, Paperchase, Telson, TM Lewin, Vitelsa, Peverel, Crawford & Co, and Kellogg's Italia. These customers are utilising Easynet’s network and hosting services to connect multiple locations across a fully resilient IP infrastructure.

The company was cash flow positive in the second quarter of 2005.

Keith Todd Chairman, Easynet Group Plc commented:

“The recent Ofcom announcements support our earlier decisions to invest in LLU and have given us the confidence to extend our local loop footprint and increase our investment in supplying consumer services both directly through UK Online and indirectly through our wholesale offering. The board have taken the decision to invest further this year in order to capitalise on our early-mover advantage in LLU in the UK and as a result enhance returns for shareholders over the medium and long term. The investment will reduce our expected 2005 EBITDA profitability to similar levels achieved in 2004, but we expect the payback to be quick as we now anticipate reaching PBT profitability in 2006, our next full financial year. Our cash position remains strong allowing us to undertake the new investment.”

Easynet Ltd.

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