WHEN the words "full, brutal review" were announced this week, KCom employees could be forgiven for feeling more than a little nervous.
Would the independent review the group has ordered mean scything through the workforce to cut costs?
KCom has already cut 210 staff in a year – do more face the chop?
Analysts don't think so. They say KCom isn't carrying a lot of excess baggag
e, and excessive pruning could rip out the heart of the business.
New executive deputy chairman Bill Halbert appears to agree.
He doesn't plan to take an axe to the business – "there are no plans for any significant further headcount reductions".
But there's no escaping the fact that with a recession hot on the country's heels, it's a case of survival of the fittest.
The Hull-based telecoms company is in need of a healthy dose of turnaround medicine.
On a pre-tax basis, it came in this week with a £103m first half loss.
KCom has come a long way from its council-owned days, and now has two very distinct main divisions.
Its underlying earnings were down four per cent and one of the divisions – integration and managed services – is feeling the squeeze as big corporate customers pull the plug on spending.
Like other telecoms groups, it hasn't been immune from the crisis which spread from the banks but now infects much of the sector.
Banks and corporate clients are delaying or cancelling spending – sending the division's underlying earnings down to just £200,000. It was forced to make a goodwill impairment charge for this division of £107m.
But the other division, telecoms and internet services, is doing well. Underlying earnings were up at £32.8m.
KCom has a captive market in Hull and East Yorkshire, where thousands rely on its broadband and telephone services. But that's not the future, according to analysts.
Keith Humphreys, analyst at Eurolan, believes ultimately the group's focus looks far beyond its domestic telephone service. "The future is not in selling voice services. It's selling data and the voice comes free.
"They are trying to take on BT."
The review means isolating the profitable and not so profitable parts of the business, according to telecoms analyst Rob Bamforth at Quocirca.
"I always look for intelligent pruning," he said. "The last thing you want is to take an axe to the business."
If the review decides asset sales are what is needed, KCom's board clearly thinks Bill Halbert is the man for the job.
This week he took the reins after chief executive Malcolm Fallen stood down.
Whether Fallen was pushed or jumped, it's hard to know.
But the appointment of Halbert clearly signals the group's direction. His CV bristles with systems integrations jobs.
He knows what he wants from KCom, and it's a lean, efficient business telecoms and networked services provider.
"The last thing you want is its people to come in and panic," said Bamforth.
"His long-standing pedigree is a reflection of the uncertain times.
"In the challenging markets we are in you have to get into a mindset of how do you get ahead of the competition."
Last year KCom's biggest shareholder, Hull City Council, ended its 100-year association with the group by selling its 30.6 per cent stake to net £115m.
It now looks to be a smart move, with Kcom shares wallowing around 11p.
Without the council's heavy hand on the company's shoulder, KCom can now move more freely.
For the thousands of small shareholders who bought into the group at the height of the dot.com boom, whatever they do had better begin reaping rewards.
If you have a view on this feel free to get in touch with Blackfriar by emailing ypcitydesk @ypn.co.ukThe full article contains 656 words and appears in n/a newspaper.
