For Subscribers

Get the complete article now!

TWST: Can we start out with a quick overview of THUS (London: THUS.L), and how you see the company today?

Mr. Allan: THUS was founded in 1994 as part of ScottishPower and was originally designed to fulfill ScottishPower’s internal telecommunication needs. The company then started offering external services to other corporate customers by extending its network, principally in Scotland. Over a number of years, until 1999, the company grew partly organically, mainly in Scotland, and partly by acquisition, the largest of which was Demon Internet, the first Internet service provider in the United Kingdom. At the time of floatation in November 1999, the company was organized into three main business segments: data and telecommunications, largely driven from services to major corporate customers in Scotland; Demon Internet, offering Internet access, hosting and security services largely to small medium sized enterprises; and a contact center capability. In November 1999, the company was listed on the London Stock Exchange. At that time the company’s strategy was to extend its reach from Scotland and London to provide service coverage to the UK’s largest towns and cities, to carry our existing customers’ services UK-wide and to acquire new customers in new geography throughout the UK. Our philosophy has always been technology smart but service focused. In this respect we built our own UK national network to control the services and quality we can offer our customers. We have maintained our investment programme and commitment to service innovation. Over the last year, our company has launched ten new services into the UK market. We believe our service innovation and service development record is second to none in the UK market. During that time we became the first company in United Kingdom to offer TV based email services; the first company in the United Kingdom to offer a wide scale broadcast streaming services; a world-first application of WAP technology for interactive services for digital broadcast television; and a world-first application of two-way SMS technology to digital broadcast television. We will also soon be offering an innovative new service to the consumer telephony market. So, as a company, what we have always done is built our service proposition around selling services to major corporate customers and larger SMEs through two brands: THUS and Demon. We have avoided the wholesale market, and the carriers-carrier market. Our focus as a business has always been to build quality recurring revenues. In the United Kingdom we believe we have the highest percentage of recurring revenues of any alternative carrier. Indeed, at the end of our last financial year, to reinforce this point, we adopted an even more conservative accounting policy so that we do not recognize any IRU sales as revenue, but rather treat them as a disposal of a fixed asset. We understand that this is the most conservative accounting policy in our industry.

TWST: What is the biggest opportunity presenting itself to you at the moment?

Mr. Allan: Our opportunity is the UK business services market, which is currently worth about £12 billion in value and growing at about 7% per annum. We currently have 2% market share and plan to double that within the next five years. Our company’s roots have a very strong base in Scotland and we have now extended this base throughout England. Just to give you an example, we supply services to 22 out of 24 local authorities in Scotland. We are very strong in the public sector, in health and education, and in England we have found that our skills and services are easily transferable and attractive to the English market. For example, we are providing services to about 2,200 London schools, and all the major London universities are directly connected to our network. Now, England is more than ten times larger than Scotland, but a significantly bigger and more attractive market. We are only just beginning to scrape the surface there. So over the next 3 -5 year period what will fuel our growth, firstly, is delivering the services we have today into new geographies where we have established our sales force, our marketing teams and network presence. Secondly, we expect our new generation of services to add to our growth as the market becomes more familiar with our quality reputation and service capability. Over the last year roughly 50% of our growth came from new customer wins, predominately from the English market, and the other 50% came from new services growth from our existing customer base. We see that trend continuing this year.