AIM-listed internet service provider Internet Technology Group Plc yesterday reported revenue up 103% at 8.8m pounds ($14m) for the six months through April 30, despite its recent investments in the consumer subscription-free ISP market, which have yet to see large-scale returns. The company reported a half-year net loss of 1.59m pounds ($2.52m), down from losses of 170,000 pounds ($269,700).
Despite the free ISP-driven acceleration in UK internet usage, ITG says it will continue to focus primarily on the business market for a stable, low-churn revenue base. But the firm has also tentatively entered the free consumer arena, offering companies the chance to launch their own-brand virtual ISPs as a customer-loyalty offering using ITG infrastructure. It now has four such partnerships which operate on a call revenue-sharing model.
CEO Laurence Blackall won’t say how many subscribers have been generated by these partnerships, saying it’s the network traffic that generates the metered dial-up charges, not the number of users. ITG says it can handle between 600,000 and 2 million simultaneous users at its two new dial-up centers. However, it seems the actual number using the services may be considerably less. ITG did not figure on a list of the 13 biggest ISPs by subscribers published yesterday by Fletcher Research Ltd (see related story), in which the lowest subscriber base was around 200,000.
The company’s four current virtual ISP partners’ are niche brands rather than household names, so ITG will need to attract more partners if it is to establish a significant user base. Blackall says users are coming, but the strategy is to focus primarily on increasing its business customer base, with an increased sales push at the SME market. Sales to businesses accounted for 45% of total revenues this period, compared to 30% last year, and Blackall expects this to grow to around 50% over the year and to hit 75% in the longer term. The consumer market, Blackall says, is simply a case of maximizing the return on the network investment, with the idea being that if business subscribers are online mainly during the day, why not open it up to consumers at night?
Geographically, ITG has expanded into mainland Europe, and hopes to shortly be able to announce a high-speed network linking London to its new facilities in Paris, Amsterdam and Frankfurt. The firm’s expansion and acquisition plans could very well be funded from the cashing in of ITG’s warrants in its half-owned digital content distribution subsidiary, GlobalWave. At current prices the $1.75 warrants could net the firm up to $16.3m.
