For the year ending March 31, the Hull, UK-based telecoms operator reported a net loss of 71.2m pounds ($134m), compared to a net profit of 17.4m pounds ($32.7m) the previous year. Kingston said the losses were a result of the impact of a network impairment provision of 89.5m pounds ($168.4m), reflecting the changing business mix and increasing commoditization of legacy network services.

Sales however rose 30.3% to 453.9m pounds ($854.7m) from 348.4m pounds ($655.7m) in 2005. The principal growth driver was Kingston’s broadband business, which ended the year with 120,500 high-speed internet users, up 63% year-on-year. Approximately 49% of broadband users are business clients.

This has been a year of progress and transition for the company, said chief executive Malcolm Fallen. We remain in a unique position – a resilient cash-generative incumbent that continues to grow strongly through our broadband activity, complemented by our growth engine, Affiniti, that is ideally positioned to capitalize on the opportunities that convergence brings.

Last November Kingston revealed it had received an approach about a possible takeover bid that was thought to have valued the group at more than 400m pounds ($695m). It was widely reported that the buyer was a private equity group led by Carlyle Group, although Kingston never revealed the identity of the interested party.

However, by March it was clear that any takeover deal was in trouble after extensive leaks in the UK press revealed that talks had become bogged down over the question of price. The sticking point seemed to have been the fact that Kingston’s largest shareholder, Hull City Council with a 31% stake, was concerned that it did not want to be seen to be selling Kingston too cheaply. Talks eventually ended in early April after the two sides failed to agree on price.

One of the biggest attractions for would-be suitors is Kingston’s network and IT services arm Affiniti, which it built up through the 169m-pound ($292m) acquisition in 2005 of former Siemens operation Omnetica. Affiniti accounted for 72% of Kingston’s revenue in the first half of 2006, and is a key part of the carrier’s strategy to reduce its dependency on traditional voice revenues. For the year ending March 31, Affiniti saw revenue rise 42.6% to 332m pounds ($625m) in 2006, from 232.9m pounds ($438m) last year. Earnings before interest, taxes, depreciation and amortization also rose 47% to 34.4m pounds ($64.7), from 23.4m pounds ($44m) in 2005.

However, Kingston’s cash position weakened over the course of the year, with cash and cash equivalents down to 12m pounds ($22.6m) compared to 28m pounds ($52.7m) a year ago. Kingston attempted to please investors by proposing a total dividend of 1.17 pence ($0.02) for the year, up 30%, but the markets were unimpressed and its share fell 1.36% on the London Stock Exchange. Kingston’s share price has fallen approximately 22% since the beginning of the year, mostly on the back of the failed takeover.

Looking forward, the carrier said the improved business performance in the second half of its financial year provides a firm basis for continued growth in the current year, where trading is in line with our expectations.