The Net is not yet easy money for Easynet Plc, the UK Internet service provider that floated on the Alternative Investment Market last year in a blaze of glory (CI No 2,878) but is seeing losses still rising. While the company saw the number of business customers grow from 163 to 818 in the year to December 1996 and consequently revenue rise by 240% to 2.2m pounds, losses shot up to 884,000 pounds from 130,000 pounds the previous year. Investors got excited at last year’s flotation, sending shares to 100 pence, only for them to plunge to 38.5 pence at the half year stage (CI No 3,000) as is all too often the way. Following the announcement of the year’s figures, shares were back up four pence at 66.5 pence. The fact remains that Internet service provision has already become a low margin commodity, leaving players to rely on the value add, or simply cost cutting and incentives to differentiate themselves. Easynet is focusing on its higher margin corporate customers, from which it gets most of its revenue, and where it considers its main competition to be from WorldCom Inc’s UUNet Pipex and British Telecommunications Plc. It has established a business division to develop services for business customers. The company also reckons it has seen 419% growth in its consumer business, and it expects increased growth as a result of being included in Microsoft Corp’s Internet Explorer referral server. In France, its 71.5%-owned subsidiary Easynet SA signed an agreement with Netscape Communications Corp to include Easynet access with retail packs of Netscape’s browser. Easynet has also been growing through acquisition in the year, with the purchase of Pavilion Internet Plc in July (CI No 3,000) and on-line service provider UK Online Ltd in November despite its earlier denial that this would happen (CI No 3,020). Chairman and chief executive David Rowe said in his statement that the company has seen a reduction in its fixed costs due to increased competition among its major telecommunications suppliers. He said the company’s main challenges now were to manage the business as it goes through rapid growth, and to recruit and develop the right people. Rowe also told Reuters the company would look to complement its activities in the UK and France with ones in Germany. We have been looking at Germany for about nine months he said, but we don’t want to stretch ourselves too much. The company policy is not to pay a dividend until profits justify the payment.
