Telco plans to capitalise on deal to double cashAuthor: Katrina...

Telco plans to capitalise on deal to double cash
Author: Katrina Nicholas
Date: 26/03/2004
Source: AFRBreaking
Publication: Financial Review
Section: Companies
Page: 64


People Telecom is considering plans to almost double its existing cash reserves by raising up to $3 million for future acquisitions.

The small telco, which is in the throes of merging with listed junior ISP Swiftel, said it hoped to capitalise on the fact it had to issue a prospectus for that deal by also raising fresh capital. People Telecom is required to produce a prospectus because, being a much larger company than Swiftel, the deal is considered a reverse takeover and requires Swiftel shareholder approval.

Incoming chief executive of the soon-to-be combined company Ryan O'Hare said yesterday he already had his eye on a few small companies.

"The board is keen to do a rights issue... there are a couple of companies we're looking at in the specialist voice reseller and IT&T integration sectors," he said.

Mr O'Hare also forecast that the combined company would generate revenue of about $110million next financial year and be profitable.

Although Swiftel is not making any money - it posted a net loss of $1.14 million for the six months to December 31, 2003 - Mr O'Hare said he planned to write down some of Swiftel's assets in June.

"Swiftel has not made write-downs before... [investors] can expect a minor clean up at the end of this year and the company will be profitable the next," he said.

He also said People Telecom as a standalone company would generate $60 million in revenue this financial year and a net profit of $2.3 million.

That would be a significant turnaround from last financial year, when, according to financial statements lodged with the Australian Securities and Investments Commission, People Telecom only made a small profit of $150,363.

People Telecom, which once counted Uecomm, Fairfax's f2, Village Roadshow and former Liberal Party treasurer Ron Walker as investors before a management buyout in September 2002, decided to combine its business with Swiftel's in January after striking a deal late last year to share back office infrastructure.

The merged company, which will be called People Telecom but retain the Swiftel name for its consumer offering, will be 64 per cent-owned by People Telecom shareholders and, according to Mr O'Hare, have around 30,000 business and residential customers