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January 15, 2006

Pipex pleases market with bullish outlook

Internet and hosting services provider Pipex Communications Plc has pleased the markets after it reported strong customer growth during 2005, that helped drive up sales by roughly 30%.

By CBR Staff Writer

In the update ahead of its full-year results, Pipex reported that trading and margins were good, which meant that shares in the company rose 10.8% on the London Stock Exchange to 13.53 pounds ($23.94) as of 2.40pm GMT.

Pipex saw the number of broadband customers increase 47% to 283,000. An added bonus is that four out of 10 of these customers are now using voice services from the ISP, helping it to further increase revenues.

According to Investec, Pipex’s trading in 2005 was in line with expectations, yet broadband growth was particularly strong and ARPU outlook is improving. The company has maintained its FY06 forecasts, and therefore the broker has maintained its buy recommendation on the stock.

The group said 75% of its data center space is currently utilized, and it is hoping for more activity when the .eu domain names are launched in April.

According to consensus forecasts, Pipex is expected to make a pretax profit before exceptionals and goodwill amortization of 7.3m pounds ($12.9m) in 2005, on revenue of 134m ($237m). In 2004, Pipex made an adjusted pretax profit of 6.2m pounds ($10.9m) on revenue of 102.3m pounds ($181m).

The company’s bullish outlook for 2006 also pleased the market, and Pipex said it expects to increase revenue from 23 pounds ($40) per customer over the coming year, adding that good progress is being made in developing its UK-wide WiMAX wireless broadband network.

WiMAX has long been touted as a possible rival for high-speed fixed-line data services, promising faster connections over much longer distances than previous wireless technologies. The technology is the work of the WiMax Forum, a non-profit organization dedicated to achieving interoperability between equipment based on the IEEE 802.16 wireless metropolitan area networking standard. It is also backed by some powerful organizations including Intel Corp.

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Pipex said customer trials of the technology are set to get underway in the first half of the year, and it is looking to accelerate its investment in broadband this year by installing its own kit (LLU) in about 100 exchanges (instead of the 60 it previously predicted) over the next 12 months.

LLU refers to the process of installing your own equipment in local telephone exchanges. This allows the installer to bypass the lines of the former incumbent BT Group Plc, which owns the valuable last-mile line into UK customer homes. Under regulatory pressure, BT was forced last year to open its telephone exchanges to competitors so they could install their own lines to people’s homes.

Last October, the company also purchased the UK ISP Freedom to Surf Plc (F2S) for 10m pounds ($17.4m) as part of its efforts to strengthen its broadband services for its customer base.

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