KCom to add another 30,000 homes to superfast broadband

TELECOMS group KCom revealed plans to connect another 30,000 homes in Hull and East Yorkshire to its high-speed fibre broadband network after reporting higher half-year profits but lower revenues.

The Hull-based group will extend its KC Lightstream fibre network beyond the 15,000 homes already connected by March 2015.

The service offers speeds of up to 350 megabits per second (mbps), which KCom claims is the UK’s fastest fibre broadband – and among the fastest in the world.

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So far its fibre roll-out has covered 10 per cent of its network with 450km of fibre. The extended roll-out will increase this to 30 per cent coverage.

Super-fast broadband allows users to stream TV online and download music and films rapidly.

“Fibre to the home is future-proofed because we can offer 45-100mbps,” said finance director Paul Simpson.

About 20 per cent of connected homes have taken up the service, with 30 per cent take-up among businesses – some 3,200 in total.

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“It would be difficult to apply that (level of take-up) to the whole area, but it shows it’s right to be thinking about fibre at this stage,” he said. “We’ve got smart TVs, a whole series of OTT (broadband TV) devices. The number of connected devices in the home is growing very significantly.”

KCom chairman Bill Halbert added: “The fastest city in the Global Broadband League table is Taegu in South Korea. Now, broadband in Beverley is nearly twice as fast thanks to KC Lightstream.”

The KC division, which serves consumers and businesses in and around Hull, is also trialling a broadband TV package. KC TV offers phone, broadband and YouView TV from £42 per month.

The success of bundled services helped KC’s underlying earnings increase one per cent to £27.8m in the six months to the end of September, while revenues were up two cent to £47.3m.

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Mr Simpson admitted the launch of fourth generation (4G) mobile internet poses a threat. Mobile operator EE recently launched its 4G service, which offers fast downloads for smart phone and tablet users, and other operators will launch next year.

“Undoubtedly there’s a risk that some people become mobile-only households,” he said. But he added: “It (4G) is not going to offer the speeds of fibre. It’s not going to be as reliable.”

Half-year group pre-tax profits increased almost two per cent to £27.5m. However, revenues dropped 4.7 per cent to £188.7m.

The group’s Kcom arm, which serves big businesses and organisations across the UK, was hurt by the squeeze on company spending and slower decision-making.

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Its revenues slid 6.9 per cent to £137.5m and underlying earnings fell 10 per cent to £14.5m.

Revenues were skewed by a one-off £7.7m fall in network build sales.

“Whilst the current economic uncertainty is having an impact on the speed and level of investment decisions being taken, particularly in the enterprise market, we remain focused on pursuing only those opportunities that offer long-term recurring revenue, at acceptable margins,” said the company.

KCom said this focus is starting to pay off, with new contracts including the Association of Train Operating Companies, Asda, Manchester Airport and WorldPay.

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It is bidding for new public services network (PSN) contracts, where public services such as police, schools, councils and health trusts share IT networks to cut costs.

“We’ve not added another PSN in the last six months and that’s a bit of a disappointment,” said Mr Simpson. “There’s a couple that we did not win and did not win for the right reasons. It was not a quality issue, it was a pricing issue.”

Mr Simpson insisted the Kcom division’s performance was strong when set against market conditions which have deteriorated over the past 12 months.

“That feels like a market share gain,” he said. “What we’re building in Kcom is a long-term book of solid, recurring revenues.”

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KCom hiked its interim dividend 10.5 per cent to 1.47p per share, and said it will update on its dividend plans in six months.

Net debt increased by more than a quarter to £94.3m, a level Mr Simpson said KCom is “comfortable” with.

Analysts at Espirito Santo investment bank cut their medium-term revenue, underlying earnings and earnings per share forecasts by one to two per cent to reflect “continued macro-economic uncertainty slowing decisions on new investments”.

“We believe it is prudent to assume slower growth in the enterprise segment in the near term,” they said. “However, we are reassured that Kcom continues to gain market share here.”

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